The day-ahead gas price fell by 0.4 pence per therm to 52.25 pence, and prices for within-day gas deliveries dropped by 0.15 pence to 52.35 pence per therm.
Traders said that the falls were a result of lower energy demand at the end of the week, but that lower supplies from Norway were expected to tighten the system and push prices up.
"The drop in imports from Norway and the cease in flows through BBL (from the Netherlands) have led to a tight balance this morning," analysts at Point Carbon said, adding that they expected day ahead gas prices to rise to a range of 52.40 to 53.60 pence per therm.
British gas demand was expected to be 170.6 million cubic metres (mcm) on Friday, almost 30 percent below the seasonal norm.
With flows seen at 164.5 mcm, the system was set to be 6.1 mcm undersupplied.
Further out on the curve the picture was more bearish.
Gas prices for delivery in September were trading at 54.15 pence per therm, and market participants said they expected prices to drop.
"Important resistances are 55.43 and 56.00 and we don't see these being retested, preferring the idea that 53.65, the recent low, will be retested soon," energy brokers GFI said.
Gas prices for delivery next winter season were down over half a pence to 63.35 pence a therm.
"There were some traders who tried to test resistance this week in the hope of driving prices up, but this effort has now stalled," one gas trader said.
High (Euronext: HCO.NX - news) storage fill levels of over 80 percent for Britain, and steady imports of Qatari liquefied natural gas (LNG) are expected to put further downward pressure on British forward gas prices.
Asian spot LNG prices dropped to just over $13 per million British thermal units (mmBtu) this week, with buyers well-stocked for the summer months, resulting in shipments being redirected to Europe (Chicago Options: ^REURUSD - news) .
POWER
In the power market, prices for the day-ahead baseload contract rose by 20 pence per megawatt-hour (MWh) to 40.20 pounds a MWh despite the return of EDF Energy's 550 MW Dungeness B21 nuclear reactor to the grid.
Traders said that the rise was a result of the reduced gas flows and because of expectations of lower wind power availability.
"The reduced gas flows mean that utilities with large gas portfolios are raising the price for their electricity, and we're also expecting lower wind power capacity in the next couple of days," one utility trader said.
Wind speeds in Britain were expected to fall from around 4.5 metres per second on Friday to below 4 metres a second on Saturday and Sunday, meteorologists at Point Carbon said.
The UK's MetOffice said that it expected conditions over the weekend to see "some sunny intervals but also showers, with many of the showers heavy and thundery," with temperatures reaching a a maximum of 21 degrees Celsius. (Reporting by Henning Gloystein; editing by Keiron Henderson)
Source: http://uk.finance.yahoo.com/news/uk-gas-system-tight-drop-093501202.html
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