March 20, 2012 / 10:59 AM / 5 years ago

UK prompt gas rises on Norway output cut

* Kaarstoe output falls 25 mcm/d after overnight trip

* Gas demand remains muted at 7 pct below norms

* High wind power production weighs on electricity market

LONDON, March 20 (Reuters) - British prompt gas prices rose on Tuesday as the system was undersupplied on the back of weak liquefied natural gas (LNG) output and an unplanned outage on Norway's Kaarstoe gas processing plant gave a further incentive to buy.

British within-day gas prices rose to 62.00 pence per therm at 1038 GMT, up 0.50 pence on the previous session, while Wednesday gas prices added 0.80 pence to 61.70 pence.

The gas market was undersupplied by around 5 million cubic metres per day (mcm/d) on Tuesday as flows from the Isle of Grain and South Hook LNG terminals dropped early in the session, National Grid data showed.

Output from Norway's Kaarstoe gas processing plant, which also sends gas to continental Europe and Britain, fell by 25 mcm/d on Tuesday morning after an unplanned shutdown overnight.

The outage was planned to end by 0500 GMT on Wednesday, operator Gassco said, reassuring traders supply would only be interrupted for a short while.

"Seems the market is moving on (the news), but flows are stable across Europe," one European gas trader at a utility said.

"Gassco have been producing well above expectations across Q1 and are slightly ahead against previous years in terms of total output. But if trip frequency increases, I would see this add to supply fears."

Another gas trader said the news had encouraged producers to buy gas to hedge against supply cuts.

British gas demand remained muted at 7 percent below seasonal norms as weather conditions were milder than usual for the time of the year.

The weather was expected to remain mild up to the weekend, the Met Office forecast, counter balancing the bullish mood on the short-term market.

Curve contracts also traded up on Monday's closing levels, pushing higher in line with the prompt and defying weaker oil prices.

Benchmark front-season gas rose 0.25 pence to 61.45 pence per therm.

British electricity prices eased slightly on Tuesday on the back of high wind power output, but with nealry 4 gigawatts (GW) of nuclear capacity out of service prices remained high.

Day-ahead baseload power fell 35 pence to 46.50 pounds per megawatt-hour.

Tuesday wind power production peaked at nearly 3,000 MW in the early morning, National Grid data showed. (Reporting by Karolin Schaps; editing by Jason Neely)

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