UK GAS-Prices slip towards new lows on supply glut, warm weather

British wholesale gas fell on Tuesday as an oversupplied system and low demand linked to warm weather pushed within-day prices down to a fresh 3.5-year low.

The contract fell by as much as 1.80 pence or 4 percent to 43.40 pence per therm in early trade, a level not seen since October 2010, while the day-ahead price shed 1 percent to 44 pence, within sight of a three-year low of 43.80 pence touched last week.

"The market is oversupplied due to stable imports, robust LNG sendout and a drop in IUK export, meaning that the within-day contract should pull down the day-ahead," analysts at Thomson Reuters Point Carbon said in a morning note.

Tuesday's domestic gas demand was forecast at 183.2 million cubic metres (mcm), below seasonal norms of around 201 mcm and well under forecast supply of 203.6 mcm, according to National Grid data.

British gas supply was also poised for a boost from four liquefied natural gas tankers from Qatar slated to arrive before the end of May.

"At current levels, prices are likely to start bumping against the start of more significant fuel switching in the UK, so that the market should see some resistance to prices falling much further," said analysts at Energy Aspects.

Low gas prices mixed with Britain's carbon floor price, which was increased in April to 9.55 pounds per tonne of carbon dioxide emitted, has made burning gas rather than coal more attractive for some utilities with efficient gas plants.

However, meteorologists said they expected mean British temperatures, which are currently around 4 degrees Celsius above normal, to fall back towards seasonal averages of around 12 degrees towards the end of the week, helping to lift demand.

Analysts said scheduled Norwegian gas maintenance outages are also expected to support prices.

Gas field maintenance planned for May 23-29 is expected to cut Norwegian production by 60 mcm per day.

British gas prices are down by over a third since the end of 2013.
Source: Reuters (Reporting by Michael Szabo; Editing by Susan Fenton)