May 30, 2012 / 8:46 AM / 6 years ago

UK prompt gas prices drop as N.Sea supplies improve

* Langeled pipeline flows to UK resume

* Mild weather, long weekend push demand 25 pct below norm

* Forward gas prices drop with oil

By Henning Gloystein

OSLO, May 30 (Reuters) - UK prompt gas prices dropped on Wednesday morning as North Sea gas supplies improved and demand remained far below the seasonal norm because of mild weather and a long weekend ahead.

Gas demand for Wednesday was expected to be 195.7 million cubic metres, almost a quarter below the seasonal norm, according to data from National Grid, and at expected flows of 207.3 mcm, the system was forecast to be 11.6 mcm oversupplied.

The long system was because Easington’s gas terminal, which feeds gas from Norway into Britain, came through the 70 mcm/d Langeled pipeline, restarting after a brief outage the previous day.

Langeled was pumping almost 30 mcm/d into Britain on Wednesday morning, according to National Grid.

Additionally, the Bacton gas field returned from maintenance, Point Carbon said.

As a result of the weak demand and increased supply, gas prices for within-day delivery were at 53 pence per therm at 0845 BST (0745 GMT) on Wednesday, down 2.3 pence since Tuesday morning.

The contract for next day delivery was down 2.8 pence to 52.20 pence per therm.

Analysts at Point Carbon said they expected spot gas prices to move sideways on Thursday as colder weather would lift demand but supplies from the North Sea were expected to improve further.

Power prices for baseload (24 hours) delivery on Thursday were also down, shedding a pound to 41.50 pounds per megawatt-hour.

The UK’s MetOffice said that it expected the weather to remain mild until the end of the week, but that maximum temperatures could fall below 20 degrees Celsius.

Further out on the curve, prices also gave in as front-month Brent crude dropped back below $106 per barrel, on track for its biggest monthly decline in two years as a worsening euro zone debt crisis weighed on markets.

As a result, the UK’s winter 2012/2013 gas contract also dropped, falling to 65.75 pence a therm, down from over 67 pence earlier this week. (Reporting by Henning Gloystein; editing by James Jukwey)

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