Gas prices spike as Britain shivers

British day-ahead gas prices hit an 11-month high as sub-zero temperatures drove up demand, supply was disrupted from domestic fields and futures firmed along with oil amid a violent turn in the Algerian hostage crisis.

By 1430 GMT Thursday, gas for Friday delivery was at 72.70 pence per therm, up 3.65 pence or 5.3 percent from Wednesday's close. It earlier hit an intraday high of 74 pence.

Britain's Met office forecast heavy snow for much of the UK in the next 24 hours, putting further pressure on the UK's gas system following sub-zero temperatures overnight.

The National Grid forecast demand for day-ahead gas at almost 400 million cubic metres (mcm), which would be the biggest requirement for gas so far this winter.

Demand for gas was around 385 mcm on Thursday, about a quarter higher than the seasonal norm.

"It was easily the coldest night of the winter so far in many parts of Britain, (and) the biggest storage sites are withdrawing as much as gas as they can," one trader said.

The prompt contract also made big gains, trading at 72.50 pence, up 2.90 pence or almost 4.2 percent. The contract earlier peaked at 75 pence for the day, spiking 8.5 percent.

Gas piped from the UK gas fields dropped to 121 mcm early on Thursday from 129 mcm on Wednesday morning, but by 1445 GMT had recovered to 126 mcm, National Grid data showed.

Supply from the IUK pipeline increased on Thursday morning to 34 mcm from 18 mcm on Wednesday, which helped to meet demand, analysts at Reuters Point Carbon said.

Britain is likely to remain gripped by icy weather well into next week, the Met Office said.

Meanwhile the front-season NBP contract was supported by reports that many people were killed after Algerian armed forces tried to bring an end to a hostage crisis at a remote gas terminal.

British gas for summer 2013 delivery traded at 62.40 pence, up 0.35 pence on Wednesday's close, while Brent crude oil traded at $110.79/barrel, up a dollar from where it settled last night.

The crisis has raised fears of future disruption to supplies from the North African country, which pipes gas to southern Europe and is an exporter of liquefied natural gas to countries including Britain.

If Algeria's In Amenas field experiences a lengthy shutdown, the impact on supply would be small for most of Europe as Russian gas would make up the difference, said Thierry Bros, an analyst with Societe Generale.

"(But) it could be more challenging for Spain as the country is less well interconnected with the rest of Europe," Bros said in an emailed note.

In the electricity market, baseload day-ahead power traded at 53.92 pounds per megawatt-hour, up 53 pence from Wednesday's close.