December 30, 2016 / 10:31 AM / a year ago

UK GAS-Prices rise on higher demand expectations, stronger oil

* Prompt prices around two-month highs

* System oversupplied by 18 mcm (Updates throughout)

LONDON, Dec 30 (Reuters) - British wholesale gas prices rose to around two-month highs on Friday on expectations of higher demand over the weekend and as oil prices gained ground.

Gas for immediate delivery was up 0.70 pence at 52.25 pence per therm at 1007 GMT, having fallen to an intra-day low of 50.50 p in earlier trade.

The day-ahead contract rose by 2.40 pence to 53.55 p/therm, its highest level since the beginning of November.

“There has been a bull run for the past few days, partly due to colder weather but also due to oil prices and gains in UK power,” a trader said.

Volume is also quite thin due to the Christmas-New Year holiday period, he added.

Thomson Reuters analysts said the temperature forecast for Saturday is 2.8 degrees Celsius below normal, which should boost demand for gas for heating.

Oil prices are on track for their biggest annual percentage gain since 2009 on the back of an agreement struck between OPEC and non-OPEC countries to cut crude production output.

The UK gas system is actually oversupplied by around 18 million cubic metres, with demand forecast at 297 mcm and flows at 315 mcm/day, National Grid data shows.

Flows are back to 30 million cubic metres (mcm) per day from Shell’s St Fergus terminal after an outage ended and Engie E&p UK’s Cygnus offshore facilities have returned to full operations.

Flows from the North Morecambe gas sub-terminal have also resumed following an outage.

However, Norwegian gas capacity will be reduced by 7 mcm for the next few days due to an outage at the Asgard gas field.

In the European Union’s carbon market, the benchmark Dec-17 carbon contract was 0.13 euro higher at 6.50 euros a tonne.

In the Netherlands, the day-ahead gas price at the TTF hub was 0.93 euro higher at 19.85 euros per megawatt hour. (Reporting by Nina Chestney)

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