British gas prices firmed on Wednesday, with cold weather across Europe driving up demand, but the upside was limited by liquefied natural gas arrivals and a fall in U.S. business gas prices.  Gas for Thursday was up 0.10 pence to 35 pence per therm, compared with day-ahead contracts late on Tuesday, while January gained 0.35 pence to 34.50 pence and February was up 0.30 pence to 35 pence.

“The prompt is strong all the way along to the weekend, and that’s reflecting the cold weather, which is below seasonal norms,” one trader said. Britain’s forecast gas demand for Wednesday was 393.5 million cubic metres a day (mcm), higher than seasonal norms of 319 mcm, National Grid data showed.

Temperatures in northwest Europe are expected to be up to six degrees Celsius below normal for the next five days, although it could be above normal further out according to the six to 10 day forecast.

“If we have cold weather in January, it could start to see the curve shifting up as we’ll need to start refilling storage which is usually done is summer when prices are low,” he added.

But supply was strong, with the Al Sheehaniya LNG tanker expected on Jan. 1, making it three vessels due to arrive in Britain at the beginning of January.  And traders said a fall in U.S. gas prices was limiting gains along the curve, with U.S. futures contracts ending three percent lower at the end of trade on Tuesday.

Gas for second quarter 2010 was flat on 33.25 pence, while gas for third quarter 2010 firmed 0.10 pence at 33.75 pence. In power, prompt eased on lower demand over the Christmas and New Year holiday period.

Baseload power for Thursday was 34.75 pounds per megawatt hour, compared with 35.25 pounds for day-ahead contracts late on Tuesday. “There is a potential reduction of supply margins over the New Year, but gas and oil are still strong and giving power prices support,” one trader said.

Peak demand for Thursday was forecast to be 49.8 gigawatts, compared with 51.2 gigawatts peak demand for Wednesday.

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