July 2, 2012 / 10:42 AM / 5 years ago

UK gas rises to digest steep oil gains, tight prompt

* UK winter 2012 rises close to 4 pct in two sessions

* Market undersupplied on lower Dutch imports, Shell Bacton flows

* Nuclear reactor restart eases prompt power

LONDON, July 2 (Reuters) - The benchmark front-season contract in Europe's largest traded gas market rose close to a one-month high on Monday, digesting a steep rise in oil prices from Friday and reacting to tight supply on the prompt, traders said.

The key contract added 0.50 pence to 65.40 pence per therm, its highest level since early June, while summer 2013 gas traded at 58.60 pence, up 0.15 pence day on day.

"High oil and the tight prompt are supporting prices," one UK gas trader at a utility said.

The front-season contract rose nearly 4 percent in two sessions, mirroring gains in the oil market, where Brent prices surged $6 per barrel on Friday on optimism after euro zone leaders reached an agreement to tackle the region's debt crisis.

Oil prices fell again on Monday after weak manufacturing data pointed at reduced industrial need for energy, but the UK gas market still digested Friday's fourth-largest daily gain in dollar terms since the oil contract was launched.

Gains on the benchmark gas contract over the past two sessions have led the contract within reach of its 50-day moving average technical level.

Prompt gas prices also rose, touching a three-week high as the UK gas system was undersupplied following a drop in Dutch imports, lower flows through Shell's Bacton gas terminal and higher-than-expected export demand to Belgium.

The market was around 14 million cubic metres per day (mcm/d) undersupplied, with imports from the Netherlands via the BBL pipeline and St Fergus Shell flows dropping around 10 mcm/d each on Monday morning, National Grid data showed.

"Interconnector exports are a bit higher than expected, but this week was always looking tight," a second UK gas trader at a different utility said.

Gas for immediate delivery rose to the highest level since June 12, adding 1.25 pence to 56.95 pence per therm and day-ahead gas also touched a three-week high of 56.75 pence, up 0.25 on the previous session.

British electricity prices for next winter also firmed, reflecting gains in the gas market, but short-term prices eased on the back of a nuclear reactor restart over the weekend.

The winter 2012 baseload power contract rose 85 pence to 48.35 pounds per megawatt-hour (MWh).

EDF Energy restarted its 610-MW Heysham 1-2 nuclear reactor on Saturday, widening supply margins after the unit had stopped unexpectedly on June 25 due to an electrical fault.

Baseload spot power settled at 41.99 pounds/MWh on the N2EX electricity exchange auction. (Reporting by Karolin Schaps; Editing by Alison Birrane)

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