December 19, 2016 / 10:59 AM / 3 years ago

UK GAS-Prices decline on warmer weather outlook, healthy supply

* British gas system slightly oversupplied

* Temperatures seen rising towards weekend

* Wind power expected to triple on Tuesday

* January forecast to be warmer than normal

Dec 19 (Reuters) - British prompt natural gas prices edged lower on Monday as temperatures were expected to rise throughout the week, reducing gas demand for heating, and some forecasts showed the weather would remain warmer than normal in January.

Gas for immediate delivery fell 0.65 pence or 1.43 percent to 44.85 pence per therm by 1035 GMT, while the day-ahead contract lost 1.35 pence or 2.92 percent to 44.95 pence/therm.

Britain’s gas system was 4 million cubic metres (mcm) oversupplied on Monday morning, typically indicating downward pressure on within-day prices, with demand forecast at 308 mcm and supplies at 312 mcm.

Prices were pressured downwards by the impending holiday season and warmer weather, while French Engie started production at the Cygnus field offshore the UK last week, boosting supplies, Wayne Bryan at Alfa Energy said.

Bryan also cited as bearish factors the restart of withdrawals from Britain’s biggest underground gas storage site, Rough, and a potential increase in deliveries of liquefied natural gas (LNG).

Maximum temperatures in the south of the country were set to fall by 1 degree Celsius from Monday to 8 degrees on Tuesday, but to rise to 12 degrees in London by Sunday, the UK Met Office said.

Winds are increasing, especially in the northwest, meaning more output from wind power turbines and reducing demand for gas in the power sector.

Peak wind power output is forecast to increase to 5.7 gigawatts (GW) on Tuesday from 1.7 GW on Monday, data from National Grid showed.

Meanwhile, Total said on Sunday it had started to ramp up gas flows from the UK continental shelf to NSMP terminal in St Fergus, with a return to normal levels expected within 24-36 hours.

One LNG tanker is expected to deliver a cargo to Britain on Wednesday, and two tankers are likely to arrive at the beginning of January.

Further along the curve, the contract for gas delivery in January was trading at 45.15 pence/therm, 0.9 pence or 1.95 percent down.

Above-normal temperatures are expected across most of Europe in the first three months of 2017, with the exception of the Iberian peninsula, the Weather Company said.

In the Netherlands, the day-ahead gas price at the TTF hub fell by 0.05 euro to 17.45 euros per megawatt-hour.

In the European carbon market, the benchmark Dec 16 contract firmed by 0.17 euro or 3.45 percent to 5.10 euros a tonne. (Reporting by Nerijus Adomaitis; Editing by Dale Hudson)

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