January 17, 2012 / 5:48 PM / in 6 years

UPDATE 1-UK gas prices drop on mild weather outlook

* Warmer UK weather forecast reduces gas demand outlook

* Power supply improved by return of Sizewell B1 reactor

LONDON, Jan 17 (Reuters) - British prompt gas prices fell to the lowest level this year as mild weather forecasts and improved supplies took pressure from the system, while the forward market received a slight push from positive economic data.

Within-day gas prices fell to a 2012 low of 51.80 pence per therm on Tuesday afternoon, down more than two pence on the previous session and day-ahead gas prices also slipped, trading down to 52.00 pence.

The weaker spot gas prices were a result of milder weather and healthy supplies, despite a rise in demand above seasonal norms on Tuesday.

“Consumption is forecast substantially down this morning giving a clear bearish signal for day-ahead,” analysts at Point Carbon said, adding that its price outlook was between 51 and 53.20 pence per therm.

The UK’s Met Office said that weather conditions were expected to become “much milder across England and Wales” by Wednesday, with midday temperatures expected to rise from just above zero degrees Celsius on Tuesday to almost double-digit figures a day later.

At around 355 million cubic metres (mcm) per day, gas consumption for Tuesday was expected to be around 6 percent above the seasonal norm, according to data from National Grid.

UK gas storage sites were filled to almost 85 percent on Monday, compared with a European average of 73 percent, according to Gas Infrastructure Europe.

Curve gas trading was slightly firmer on Tuesday afternoon as UK inflation figures fell sharply in December and investor confidence in Germany posted a record rise in January.

Benchmark summer 2012 gas rose 0.10 pence to 51.35 pence per therm.


In the power market, spot prices were also down, with the day-ahead baseload contract shedding 3 pounds per megawatt-hour (MWh) to 40.50 pounds a MWh.

The drop came on the back of milder weather and the return of EDF Energy’s 630 megawatt Sizewell B1 nuclear reactor to the grid.

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