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Gas and power prices surge amid cold snap

LONDON (Reuters) - Gas and power prices soared on Wednesday as a cold snap elevated demand for heating and as neighbouring markets required gas and power imports from Britain to meet their own high energy consumption.

Gas for delivery on Wednesday traded up to 64.00 pence per therm, more than 40 percent above levels seen one month ago, while power for Thursday delivery traded at the highest level since the beginning of the year at 71.00 pounds per megawatt-hour (MWh).

On Wednesday afternoon, gas demand forecasts exceeded levels set by network operator National Grid as critical for meeting market balance.

But a spokesman for the company said supply was strong enough to meet high demand levels, reducing the risk of a gas balancing alert (GBA).

Gas imports from Belgium via the Bacton Interconnector stopped at the start of the gas day at 0600 GMT, according to National Grid data, which further tightened an already strained market.

But imports from Norway rose shortly after, preventing the system from falling short.

Supply from long-range gas storage also continued flowing steadily, while levels were almost 20 percent below versus a year ago, National Grid data showed, sparking concerns that storage supply may not last into later this winter.

“It’s insane, there’s a lot of panic. There’s no interconnector (flows) and demand is very high. If we have the smallest supply issue it’s going to be worrisome,” one gas market participant said.

Demand for Wednesday was nearly 110 million cubic metres (mcm) above levels normally seen at this time of the year, National Grid data showed.

Most of Britain was covered in snow on Wednesday and overnight temperatures were below zero nearly everywhere in the country, the Met Office said.

“Temperatures are likely to continue below average, with widespread frosts, sometimes severe,” the forecaster said on Wednesday about the 16-30 day period ahead.

Cold temperatures across Europe are expected to tighten energy prices across the continent this winter.

Traders said the extended cold forecasts also lifted contracts further out, with the new front-month January trading up 1.95 pence at 56.20 pence ($8.77 per mmBtu).

POWER

The power market tracked high gains in the gas market but also reacted to tight supply margins as five nuclear units remained off line and France was importing from Britain at full capacity until later in the afternoon on Wednesday.

Power for day-ahead delivery traded as high as 75.00 pounds per MWh but was last quoted at 71.00 pounds at 1725 GMT.

“We have a tight system, strong gas, it’s very cold and we’re seeing a strong French market,” one power trader said.

Power demand in France, where one third of domestic users rely on electricity for heating, is expected to reach a new record high at peak hour on Thursday, according to grid operator RTE.

With demand also at record highs on Wednesday, France was importing power from Britain at the interconnector’s full 2,000-MW capacity until around 1630 GMT, National Grid data showed.

Thursday’s peak-hour prices traded as high as 155 pounds per MWh in Britain and 170 euros in France, one trader said.

Reporting by Karolin Schaps, editing by Jane Baird and Sue Thomas

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