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LONDON (Reuters) - Wholesale gas prices fell on Wednesday as imports increased through a Belgium pipeline and flows from Norway hit their highest for a year, while demand is set to decline as temperatures rise, traders said.
Gas prices for delivery on Thursday were trading at 70.50 pence per therm at 10.15 a.m. British Time, down 0.7 pence from prices paid for Wednesday delivery, while gas for within-day delivery traded at 70.25 pence a therm, down 0.75.
"We've seen flows increase through continental pipelines as the spreads with continental gas have made it attractive to withdraw from Dutch and German storage and send it to the UK," said one gas trader.
"The weather is getting milder but with UK storage levels low, an unplanned outage has the potential to prompt prices to rise again," the trader added.
Wednesday's gas demand was expected to be 353.8 million cubic metres (mcm), 18 percent above the seasonal norm, data from National Grid showed.
Imports through the IUK pipeline that runs from continental Europe rose to 43 mcm/day, up 7 mcm/d up from Tuesday.
Gas deliveries from Norway to Britain rose by 1.8 mcm to 134.2 mcm, the highest level in more than a year.
Analysts forecast demand would fall in the coming days as temperatures are forecast by the Met Office to rise to 9 degrees Celsius by Thursday, up from a maximum of around 4 degrees earlier in the week.
Britain's gas storage sites were filled to an average of 24.2 percent on Tuesday evening, down 1.7 percent from the day before, data from Gas Infrastructure Europe showed, and down from 57 percent at the beginning of February.
Withdrawal capacity at Rough, the UK's largest storage site, will be reduced by 50 percent between 0000 and 1200 GMT on Thursday, according to operator Centrica, and again on 3 March.
Traders said the planned outage had already been priced in while analysts expect storage levels to rise because of expected lower demand.
"A bullish risk factor for the day-ahead is the current low storage stock levels, which means prompt prices could suddenly turn very bullish if additional flexibility is required during the day," analysts at Reuters Point Carbon said in a daily report.
Further along the curve, the March contract was priced at 67.75, down 0.4 pence, amid expectations by some forecasters that Britain will see temperatures close to or above the seasonal norm next week.
Gas for summer delivery traded up 0.25 pence to 64.80 pence as Brent crude oil prices rose around 40 cents to $113.13/barrel.
British power prices for day ahead delivery traded at 53.75 pounds a megawatt-hour, down 3.25 pounds from Tuesday's close.
Reporting by John McGarrity; Editing by Helen Massy-Beresford