UK gas prices are unlikely to slide further in coming months, as some analysts forecast, because importers will probably reduce supplies over the summer, Lehman Brothers said on Wednesday. A week after analysts at Merrill Lynch slashed their UK gas price forecast for this year from 42 pence per therm to 25 pence, citing low demand and oversupply, rival U.S. investment bank Lehman is less bearish. “Although there is clearly some downside risk to our UK natural gas price forecast of 40p/therm for 2007, we do not forecast a complete collapse in prices in the coming months as we believe current and planned import capacity is flexible enough to partly mitigate severe oversupply,” it said in a research note. Merrill Lynch said last week that large amounts of gas still in storage, after one of the warmest winters on record, should keep downward pressure on UK gas prices throughout spring and into summer. Summer demand is usually supported by shippers buying on the spot market to stash away cheap gas for the next winter. So some traders and analysts expect UK gas prices to continue to fall through summer as low demand for storage, combined with continuing large imports, floods the market. But Lehman expects Norwegian producers, which have been largely responsible for the huge flows of gas into the UK since last autumn, could delay production until next winter when they can reasonably expect to get more for their gas. Meanwhile, forward gas contracts will remain linked to oil, where prices are likely to be supported by falling production, Lehman said. “A takeaway from the outlook statements accompanying the oil company year-end results we have seen so far has been the managing down of company production targets and accelerating decline rates,” the research note reads. “We continue to believe that the oil market remains tight and these factors should be supportive to the oil price going forward.”

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