UK prompt gas prices rebound in technical rally
OSLO (Reuters) - British prompt gas prices surged on Monday in a technically driven rally following last week's lows, lifting benchmark forward contracts, despite ample supplies as mild weather kept a brake on demand.
"This is mainly short-covering as traders unwinding short from last week when the market hit a low point...there's no other direction to go but up for now," a trader from a bank said.
Gas for next-day delivery was trading at 54.05 pence per therm, up 1.05 pence from Friday, while gas for within-day deliver was trading at 53.75 pence, up 1.40 pence on the day.
By contrast, analysts said that the price outlook for day-ahead gas contracts was flat as low demand and low gas flows would offset one another.
"Consumption is forecast down, providing a bearish price signal while maintenance at Bacton Shell is bullish for the day-ahead gas prices," analysts at Point Carbon said, adding that they expected prices on Tuesday to be around 52.70 pence per therm.
Gas demand in Britain remained weak, projected at 188.3 million cubic metres (mcm) for Monday, almost a third below the seasonal norm, data from National Grid showed.
At expected flows or 192.6 mcm, Monday's system looked to be 4 mcm oversupplied. It was about 15 mcm/day oversupplied at the start of the day, showing that supply and demand had tightened, lifting prices further.
The reduced flows were a result of low supplies through the Langeled gas pipeline from Norway following a technical error at the Troll gas platform last week.
Some 36 hours of scheduled maintenance at the Bacton Shell gas field started on Monday, reducing flows by another 10 mcm per day.
The benchmark winter 2012 gas contract rose 1.74 pence to 67.19 pence on the day.
Weak demand also affected the power market, where the price for next-day baseload (24 hours) delivery fell 65 pence per megawatt-hour (MWh) from Friday to 39.95 pounds per MWh.
The UK's MetOffice said that temperatures in Britain were expected to remain warm for most of this week, although last week's levels would not be reached and showers and thunder storms could occur.
For Tuesday, the MetOffice said it expected a maximum temperature of 23 degrees Celsius.
(Reporting by Henning Gloystein and Oleg Vukmanovic; editing by William Hardy)
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