Prices dip as healthy supply compensates for demand uptick

LONDON, Feb 6 (Reuters) - British and Dutch wholesale gas prices mostly dipped on Monday morning as healthy supply compensated for higher demand due colder temperatures and weak wind output.

The benchmark front-month contract at the Dutch TTF hub fell by 2.55 euros to 56.20 euros per megawatt hour (MWh) by 0952 GMT, while the April price was down 2.65 euros at 57.15 euros/MWh, according to Refinitiv Eikon data.

The British day-ahead contract was down 4.00 pence at 151.00 pence per therm, while the summer 2023 contract was 2.07 pence lower at 154.93 p/therm.

Colder temperatures are forecast for the next few days in north-west Europe, which could increase demand for heating. In Britain, temperatures are forecast to pick up towards the end of the week, Refinitiv Eikon data showed.

UK peak wind generation is forecast at around 6.8 gigawatts (GW) today and tomorrow, out of total metered capacity of around 22 GW, Elexon data showed.

However, wind speeds are forecast to pick up after that towards seasonal normal levels, according to Refinitiv gas analyst Timothy Crump.

Healthy liquefied natural gas (LNG) send-out and Norwegian exports are helping to mitigate the uptick in demand, traders said.

On Friday, Freeport LNG, the second-biggest U.S. liquefied natural gas (LNG) exporter, said it plans to restart one of three liquefaction trains at its long-idled Texas export plant on Feb. 3.

The Freeport plant shut after a fire in June 2022. Analysts expect it will take until mid-March or later for Freeport to return to full LNG production.

Trading Hub Europe said on Monday it has secured over 35 terawatt hours of gas storage for winter 2023/24 in Germany, which equates to around 14% of the country's total gas storage volume.

Analysts at UBS said they expect European storage levels to end this winter at up to 50% full, higher than previously expected, due to lower consumption.

"Europe will enter the next injection season much more comfortably and we expect to see nearly full inventories ahead of winter 2023-24 and inventories falling to around 50% by end-March 2024, assuming normal temperatures and continued weak demand from industry," they said.

However, Dutch prices have fallen to below 60 euros/MWh, a level which could be a floor at which some industrial gas demand is revived.

Analysts at Bernstein said Europe will be dependent on mild weather and continued demand destruction in the coming years.

They expect gas balances to remain tight as Europe will receive around 40 billion cubic metres (bcm) less in 2023 year-on-year and China could return to the LNG market, creating competition for cargoes.

There will be at most 25-30 bcm of new LNG supply coming to the market over the next few years and the reliability of existing supply could wane due to gas sourcing issues in Trinidad & Tobago and Nigeria, they added.

In the European carbon market, the benchmark contract rose by 1.94 euros to 95.23 euros a tonne.