* 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 (Reuters) - 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 session.
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)