January 30, 2012 / 11:46 AM / 6 years ago

UK spot, curve gas surge as temperatures plunge

* UK winter 2012 gas touches 11-week high

* Sub-zero temperatures drive demand 6 pct above norms

* Fresh LNG delivery eases pressure on terminals

London, Jan 30 (Reuters) - British gas for summer delivery surged to a seven-week high early on Monday as temperatures plunged and storage withdrawals accelerated to meet rising demand.

Gains pushed summer 2012 gas back above technical support levels, but brokers questioned the longevity of the surge given the bearish backdrop that has underpinned a months-long decline in prices.

The contract retreated to 57.60 pence ($0.90) at 10:30 GMT on Monday, up on the day by just under a penny, following a burst of buying interest that propelled it to a high of 58.4 pence earlier that morning.

UK gas for next winter delivery touched 11-week highs of 70.50 pence but fell back to about 70 pence in mid-morning trade, pulled lower by softening prompt prices which drove gains across the forward curve. The contract was still up 1.45 pence on the day.

Sub-zero temperatures across Britain this week drove demand for gas-fired heating above the seasonal average and piled pressure on stretched terminals to deliver more fuel.

A drop in liquefied natural gas (LNG) shipments since the start of 2012 has curbed send-out from Britain’s biggest terminal South Hook, in Wales, although flows increased on Monday as a fresh tanker set sail from Qatar.

Tuesday gas added more than 3 percent to 60.20 pence ahead of icy conditions sweeping in from Europe through Friday, while demand rose 6 percent above seasonal norms.

Ample supply kept a leash on upward momentum, however, with the transmission system about 14 million cubic meters/day oversupplied.

“Given the explosive opening to the week, I think downside will be quite limited for the rest of the day,” a trader with a major UK utility said.

WEATHER

Forecasters see temperatures dropping to overnight lows of minus 4 degrees Celsius and expect night-time conditions to remain comfortably below freezing throughout the week.

“Staying cold or very cold for the end of this week and next weekend. Some wintry showers then likely near North Sea coastal areas, elsewhere conditions largely dry and settled with some sunshine, but also frosty with freezing fog patches,” Britain’s Met Office said.

TECHNICALS

The benchmark summer 2012 gas contract traded neared its 200 exponential daily moving average (DMA) support level and remained above its 50 DMA level.

POWER

Day-ahead baseload power tracked gas sentiment to trade at 44.50 pounds per megawatt hour on Monday. ($1 = 0.6383 British pounds) (Reporting by Oleg Vukmanovic, editing by Jane Baird)

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