* UK winter gas could rise above 90 pence - Merrill
* Prompt gas up on tight system despite low demand
* Power falls ahead of weekend
LONDON, March 8 British benchmark
front-season gas prices rose close to a one-week high on
Thursday as oil rebounded and analysts renewed concerns about
Britain having to compete for liquefied natural gas (LNG) with
higher-paying Asian buyers.
Gas for delivery this summer rose 2.6 percent day on day to
59.70 pence per therm, after oil rose above $125 per barrel on
hopes Greece can avoid a messy debt default, traders said.
Sentiment was also supported by anlysts at Bank of America
Merrill Lynch predicting UK winter gas prices could trade above
90 pence as Britain could see a drop in LNG supply with Japanese
and other Asian buyers attracting higher imports.
"In the UK, we see upside for Winter 2012/13 gas prices to
rise to contract levels above 90/pence per therm on reduced
LNG flows and higher oil prices," analysts said in a research
note on Thursday.
Prompt gas prices also rose, gaining more than a penny to
58.50 pence on the day-ahead contract and 58.75 on Thursday gas.
Contracts were supported by bullishness on the curve, but an
undersupplied system and early-morning drop in withdrawals from
storage also lifted prices on the prompt.
Prompt prices had been trading largely range-bound over the
past sessions and traders said the bullish curve gave an impetus
to buy on the prompt.
"I would chracterise the gains as the expected volatility
with the market so uncertain as to future price path confronted
with little LNG, high oil but lousy demand," one energy trader
at a trading house said.
UK gas demand was slightly below seasonal norms on Thursday,
but the market was undersupplied, National Grid data showed.
Withdrawals from long and medium-range storage sites stopped
at the start of the gas day at 0600 GMT and flows from LNG
terminals also dropped slightly, the data also showed.
British power prices defied bullish gas movements and traded
down day on day as demand was set to drop ahead of the weekend,
while wind power production forecasts were relatively strong.
Spot baseload power traded at 44.70 pounds per
megawatt-hour, down from over 45 pounds seen in the previous
Five nuclear reactors remained offline for maintenance,
refuelling and unplanned outages.
EDF Energy's Sizewell B2 nuclear reactor was forecast to
restart on Saturday, while its Hartlepool 2 reactor was due to
shut down on the same day.
(Reporting by Karolin Schaps; editing by Keiron Henderson)