Prices rise on short covering, Norwegian outage

British and Dutch wholesale gas prices rose on Monday morning on traders closing short positions ahead of the expiry of front-month contracts, although forecasts for milder and windy weather should curb demand over the next few days.

The benchmark front-month contract at the Dutch TTF hub (TRNLTTFMc1) was up by 3.75 euros at 58.00 euros per megawatt hours (MWh) by 0949 GMT, according to Refinitiv Eikon data.

The Dutch day-ahead contract (TRNLTTFD1) rose by 3.90 euros to 57.40 euros/MWh.

Volumes were quite thin and prices might be rising due to traders closing short positions at the end of the month, a trader said.

"I'd say it [the move higher] is stronger than fundamentals suggest," he added.

An unplanned outage at Norwegian gas processing plant Kollsnes until Thursday, which was announced over the weekend, might be providing some support, Refinitiv analyst Yuriy Onyshkiv said.

The first half of February will be rather mild with near- or above-normal temperatures, with no major cold spells likely before mid-February, Refinitiv meteorologist Georg Mueller said.

The British day-ahead contract (TRGBNBPD1) was up 5.00 pence at 145.00 p/therm, while the within-day (TRGBNBPWKD) contract was up 4.00 pence at 146.00 p/therm.

Peak wind generation in Britain is forecast at 18.3 gigawatts (GW) both on Monday and Tuesday, close to total metered capacity of around 22 GW, Elexon data showed.

Strong wind output significantly reduces the need for thermal power generation, analysts at Engie EnergyScan said in a morning note.

"This tends to make the competition between gas and coal power plants irrelevant as both are gradually pushed out of the power merit order," they added.

The UK gas system was 19.6 million cubic metres (mcm) per day short on Monday, according to National Grid data.

European gas storage levels have declined in January but, at 72.8% full, they remain around 35 percentage points above levels seen at the same time of year in 2022, the latest data from Gas Infrastructure Europe showed.

In the European carbon market, the benchmark contract (CFI2Zc1) gained 1.39 euros to 87.84 euros a tonne.