Gas and power prices rise on supply

LONDON (Reuters) - Prompt gas and power prices rose on tight supplies on Tuesday, while forward contracts were pushed up by rising oil and coal costs, traders said.

Gas for prompt delivery initially fell after major producer StatoilHydro (STL.OL) and Norwegian gas transport network operator Gassco said key gas export assets had returned to normal operation early on Tuesday.

But prices bounced back when Norwegian exports remained low, and the UK system short of gas, with within-day surging about 5 pence per therm to 70.00 pence, while Wednesday rose to around 65 pence.

"We aren't seeing much extra Norwegian gas, despite Oseberg etcetera," one gas trader said. "It's still short."

Power supplies were also tight, with several plant shutdowns over the last two days adding support to prompt prices, with baseload power for Wednesday traded around 93.50 pounds.

"The system is a little bit tighter," said one trader, adding that big rises in coal prices in recent weeks was adding to upward pressure on electricity costs.

"Coal underpinned it. It's coal getting priced in as well."

While bullish coal markets spell higher generation costs for many power plants, rising gas prices -- driven by strong oil -- mean higher costs for others.

Winter 08 gas rose about a penny to 100.80 pence per therm, as U.S. light crude oil rose to $137.00, helping push up power prices for next winter by nearly a pound to 91.90 pounds per megawatt hour, according to one broker.