Gas prices surge as cold stirs supply nerves

LONDON (Reuters) - British gas prices soared on Monday, as cold weather stoked demand and concerns that supplies could get tight in January, but prompt prices eased later as flows into England rose.

Cold weather pushed demand for the heating fuel to well above average for the time of year, helping push gas for delivery on Monday up to a high of around 65 pence per therm.

But flows of gas from continental Europe and the North Sea into southeast England picked up later, turning a short system into a well supplied gas network and pushing within-day prices down to a late low of 62.90 pence, according to one broker.

Gas for Tuesday hit a high of 65 pence, compared with prompt gas prices of less than 60 pence paid last week, before easing to 64.25 pence.

"It's a bit colder weather and people weren't expecting it," one trader said before supplies were boosted by increased flows into the Bacton import terminals.

High prices paid for gas in the UK prompted the pipeline linking Britain to Belgium to flow fuel into Bacton from Sunday until early Monday afternoon, according to data from network operator National Grid. But that stopped around 3 p.m. after spot prices fell.

The price of gas for January delivery jumped to 65.25 pence per therm at one point, up from 60 pence on December 24, but dropped back to 64.40 pence later.

Colder-than-average weather forecast for the start of next year has heightened concern that supplies of gas, which is used to heat most homes in Britain, could be tight early next year.

Fears that Russia could cut Ukraine's gas imports on January 1, with a knock on effect on western European supplies, have also helped support January gas prices over the last week.