January 9, 2012 / 10:54 AM / in 6 years

UK gas rises as weather due to turn cooler

* Colder weather expected from Friday - Met Office

* Rest of winter to turn colder, less windy - Point Carbon

* Lower wind, exports drive up spot power prices

LONDON, Jan 9 (Reuters) - UK prompt gas prices rose on Monday morning as cooler weather forecasts towards the end of the week increased the demand outlook and after a drop in gas flows from one liquefied natural gas (LNG) terminal left the system tightly supplied.

The within-day gas contract gained 1.05 pence on Monday, rising to 53.90 pence per therm, after supply from the South Hook LNG terminal fell to the lowest since the beginning of the year, tightening supply margins.

Weather forecasts for Friday onwards show colder weather, with temperatures potentially dropping below seasonal norms at the start of next week, Britain’s Met Office said.

Gas for the balance of this week rose above spot price levels at 54.00 pence per therm, up 1.75 pence from the previous session.

“Flows from South Hook are oddly lower than last week, also weather forecasts are coming in cooler for next week,” one UK gas market analyst said.

Front-season gas rose for the first time in three sessions, rebounding from a 13-month low reached on Friday to 53 pence, up 0.90 pence from its pre-weekend closing price, driven by rising Brent prices.

WEATHER

Monday temperatures remained well above seasonal norms which kept gas demand low, but the forecast for cooler weather later this week is likely to drive consumption levels towards normal levels.

Weather forecasts from Point Carbon, a Thomson Reuters company, also showed the second part of the winter period in northern Europe is expected to turn colder and less windy.

“First outlook for later spring and early summer hints at a mostly near normal spring but possibly a rather warm early summer,” said Point Carbon meteorologist Georg Mueller in his latest seasonal outlook report published on Monday.

DEMAND AND SUPPLY

Monday gas demand was pegged 13 percent below seasonal norms on the back of the mild weather, National Grid data showed.

Gas flows from the South Hook gas terminal fell over the weekend and on Monday remained below rates seen last week.

POWER

British spot power prices rose in line with gains in the gas market and on the back of a tighter system due to lower-than-forecast wind power production and exports to neighbouring markets.

Day-ahead baseload power traded at 41.65 pounds per megawatt-hour (MWh), up 1.30 pounds from the previous session.

“We are being dragged up by stronger NBP and fundamentals here look weak,” said one UK power trader at a large utility.

Wind power production on Monday morning was slightly lower than forecast and exports to neighbouring France and the Netherlands rose from levels seen over the weekend, National Grid data showed. (Reporting by Karolin Schaps; editing by Jason Neely)

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