London (Platts)--14May2007

UK gas prices at the National Balancing Point rocketed Monday as demand
came in much higher than expected in a week when players expected reduced
demand, traders said. 
     Within-day was up almost 2 p/th from Friday to 25.5 p/therm during the
morning, softening a touch to 25.3 p/th by midday BST (1100 GMT), while
day-ahead was up over two and a half pence to 25.5 p/th by noon BST.
     Traders said they had expected a week of reduced demand as the Rough gas
storage facility is unavailable for injection throughout the period, taking
around 15 million cubic meters/day of demand away. But cold weather and high
demand from continental Europe pushed demand up to around 20 million cu m/day
higher than last week, traders said.
     National Grid data showed demand at 49 million cu m/day above seasonal
norms at 1100 BST, or 274 million cu m/day in absolute terms. Demand last
Thursday was 261 million cu m/d and Sunday night NG was forecasting similar
demand for Monday.
     Traders said demand was up across the board, including both large and
small consumers, although one trader said he expected higher prompt prices to
choke off some of the demand from power generators and other large consumers
through the day.
     Higher demand was met by an increase in flows through the Langeled
pipeline from Norway, which has provided erratic quantities over the past few
weeks. Flows were up to around 35 million cu m/day at 1030 BST, which may be a
response to price and may indicate that lower flows in the last two weeks are
at least partly due to low UK prices. 
     Other flows remained relatively stable, although one traders said there
were a few "niggly field problems."
     The system had been slightly long during the morning, at 1.4 million cu m
long at 1000 BST, but this had fallen to 3.8 million cu m short by 1100 BST,
while physical flows on NG's website indicated a greater shortfall.
     The curve again took its lead from the prompt and June traded up level
with within-day and day-ahead, reaching 25.5 p/th by midday BST up over 2
pence from Friday. July followed more sedately, trading to 23.5 p/th by 1200
BST, up only just over a penny from Friday.
     The seasonal contracts were also fairly bullish and winter 07 was up 1.7
p/th at 46.7 p/th by 1200 BST. Summer 08 traded up 1.1 p/th at 31.1 p/th, but
was offered there at noon BST. Traders said capacity auctions had added only
slightly to curve bullishness. January 2008 capacity at the Easington terminal
sold for arorund 15 p/th Friday, well above the usual level, which tends to be
under 0.5 p/th.
     Power was also very strong Monday. UK prompt power surged on a tight
market and rising gas prices, traders said. "Every system that was around was
short," one trader said, indicating tight UK power and gas, as well as French
and German power markets. "You get a flood of buyers and not a lot of
sellers."
     Day-ahead baseload opened at a heard GBP26/MWh and shot up to a trade of
GBP28.50/MWh, while bids reached as high as GBP29/MWh before noon BST, traders
reported. Day-ahead peak was heard traded at GBP45/MWh. Day-ahead base closed
Friday at GBP22.1/MWh.
     The day-ahead baseload contract last touched GBP28/MWh on December 27,
2006.