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UPDATE 1-UK prompt gas prices drop as N.Sea supplies improve
May 30, 2012 / 5:12 PM / 5 years ago

UPDATE 1-UK prompt gas prices drop as N.Sea supplies improve

* Langeled pipeline flows to UK resume

* Mild weather, long weekend push demand 25 pct below norm

* Forward gas prices drop with oil (Updates prices, flows)

By Henning Gloystein and Oleg Vukmanovic

OSLO/LONDON, May 30 (Reuters) - British gas prices sank on Wednesday as North Sea gas supplies improved and demand remained far below the seasonal norm because of mild weather and a long weekend ahead.

Gas demand for Wednesday was expected to be 203 million cubic metres, almost a quarter below the seasonal norm, according to data from National Grid, and at expected flows of 205 mcm, the system was slightly oversupplied.

The restart of Norwegian flows via the Langeled pipeline - Britain's main sub-sea import route - packed surplus volumes into the national transmission system following a brief outage on the line.

Langeled was pumping almost 30 mcm/d into Britain on Wednesday morning, according to National Grid.

Additionally, the Bacton Shell gas terminal resumed receiving gas deliveries after returning from maintenance.

As a result of the weak demand and increased supply, gas prices for within-day delivery were at 53.1 pence per therm, down 1.2 pence since Tuesday afternoon.

The contract for next day delivery was down 1.1 pence to 53.35 pence per therm.

Analysts at Point Carbon said they expected spot gas prices to move sideways on Thursday as colder weather would lift demand but supplies from the North Sea were expected to improve further.

Power prices for baseload (24 hours) delivery on Thursday were also down, shedding a pound to 41.50 pounds per megawatt-hour.

The UK's MetOffice said that it expected the weather to remain mild until the end of the week, but that maximum temperatures will likely fall below 20 degrees Celsius.

Further out on the curve, prices also gave in as front-month Brent crude dropped back below $106 per barrel, on track for its biggest monthly decline in two years as a worsening euro zone debt crisis weighed on markets.

As a result, the UK's winter 2012/2013 gas contract also dropped, falling to 65.10 pence a therm, down nearly two pennies compared with the previous session. (Editing by James Jukwey and Mike Nesbit)

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