LONDON (Reuters) - British prompt gas prices fell on Wednesday morning due to an oversupplied transmission network, as warm weather cut heating demand.
The price of gas for Thursday delivery fell 0.40 pence to 65.50 pence per therm at 0900 GMT, pulled lower by rising supplies. Gas for instant delivery also traded at 65.50 pence per therm, down 0.55 pence on the day.
Later-dated gas contracts were buoyed by firmer oil prices.
Gas demand is expected to reach 161.6 million cubic metres (mcm) on Wednesday, more than a quarter below the seasonal norm, according to National Grid data, showing the impact of current weather conditions on demand.
Temperatures in southeast England are expected to hit 28 degrees Celsius on Sunday, marking the peak of a warming trend seen this week with temperatures averaging 24 degree Celsius.
Britain’s Met Office forecast that temperatures for a week from Sunday will come more in line with normal levels throughout the UK, except in parts of the south, where they “could be very warm.”
The gas market was oversupplied by around 4 mcm on Wednesday, National Grid data showed.
Imports from Norway and the Netherlands increased compared with Tuesday levels, analysts at Thomson Reuters Point Carbon said, adding to already ample supplies.
At the same time, Britain exported around 20 mcm to mainland Belgium through a sub-sea pipeline link, data showed.
Adding to downward price pressures, a shipment of liquefied natural gas (LNG) due at South Hook in Wales on Tuesday should add to supplies.
“In addition, UK exports to the continent are lower and the Rough storage injections are also slightly lower,” Point Carbon analysts said.
Further out on the supply curve, gas contracts for the upcoming winter season were priced around 72.90 pence a therm on Wednesday morning - a level usually seen during higher demand winter months. The contract was up 0.20 pence on the day.
Front-month Brent crude prices were trading just above $108 per barrel on Wednesday morning, up from little over $100 in late June.
Price differences between key near-term gas delivery periods show that despite the current oversupply, traders still expect the remainder of this month to be somewhat tight on supply, said Joe Conlan, market analyst at Inenco.
“The balance-of-month and September delivery contracts are almost on a par with each other, which shows that the market thinks July will be tighter later,” he said.
The November delivery period is also trading at a premium to the fourth-quarter contract, indicating that supplies during the period will be especially tight, Conlan said.
Britain’s gas storage sites are currently filled to an average of around 60.66 percent, according to Gas Infrastructure Europe, around 8 percent below levels at this time last year.
Reporting by Oleg Vukmanovic; editing by Jeff Coelho