December 2, 2010 / 10:06 AM / in 7 years

UK gas price rise as cold spell drains stocks

* LNG expected to help temper market fears of shortages

* At least 5 tankerloads LNG expected to arrive in next week

LONDON, Dec 2 (Reuters) - UK gas prices rose on Thursday as high heating demand in a prolonged cold spell continued to drain Britain’s limited gas stocks, increasing fears over supplies for the rest of winter.

With temperatures plunging to less than -20 degrees Celsius in Scotland overnight, prompt UK wholesale gas prices rose to their highest level since early 2009, when a fifth of Europe’s gas was cut off during a row between Russia and Ukraine.

Gas for delivery on Thursday rose to a high of 64 pence per therm before easing to 62.50 at 0910 GMT, up 1.25 pence from the close on Wednesday, while gas for delivery on Friday traded roughly in line with Thursday contracts.

Britain’s biggest gas storage site, Rough, continued to pump into the UK network at near capacity, according to data from National Grid, leaving less to top up supplies for later in winter which is usually colder than early December.

But Britain’s increased capacity to import liquefied natural gas (LNG), most recently boosted by the expansion of the Isle of Grain terminal near London, should help temper market fears.

“There’s lots of LNG waiting to sell into it though,” one UK energy market trader said, adding that with demand for gas so high any supply problem would likely cause prices to spike.

At least five tankerloads of super-cooled gas are expected to arrive in Britain over the next week.

Freezing weather pushed forecast demand for the day up to 453 million cubic metres (mcm), more than 100 mcm above seasonal norms, but supplies from Norway, the South Hook LNG terminal in Wales and the gas link with Belgium were strong on Thursday morning.

The extended cold period and rapid depletion of Britain’s gas stocks also lifted contracts further out, with the new front-month January rising another 0.80 pence to 57 pounds ($8.89 per mmbtu) after rising nearly 2 pence on Wednesday.

Reporting by Daniel Fineren, editing by Jane Baird

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