The price of gas collapsed over the weekend as warm weather and full storage tanks forced importers to give away gas for - literally - nothing.

At one stage on Sunday, the within-day delivery price for wholesale gas fell to 0p per therm as suppliers were forced to give away surplus fuel in order to balance the system.

The zero-trades occurred on APX, a 24-hour trading platform, and followed a weekend of weak prices and unusually warm weather. A price of zero or a negative price is highly unusual, according to ICIS Heren, the gas price assessor.

Two years ago, prices briefly went negative when huge volumes of Norwegian gas were suddenly pumped into Britain during the commissioning of a new pipeline.

However, Sunday's price collapse was different. Louise Boddy, the managing editor at ICIS Heren, said: “This is about supply and demand, it is all bearish at the moment.”

Householders will not immediately benefit from the bizarre trading over the weekend, but the falling short-term spot prices will, eventually, feed through into the wider market. On Monday, the within-day price had bounced back to 28p per therm, but even that figure is far below the average price of 60p per therm during the summer, according to ICIS Heren.

The collapse in the spot price is occurring because large volumes of Norwegian gas are being pumped into Britain through Langeled, a new pipeline, at a time when gas storage is full.

Britain suffers from a shortage of storage, a lack of flexibility that causes high gas prices during periods of high winter demand. However, the present coincidence of weak demand and nowhere to put surplus gas has left importers with no choice but to give away the fuel.

Ms Boddy does not expect the zero pricing to recur quickly. “The Norwegians are not stupid; they will bring volumes down.”

Meanwhile, forecasters are predicting a global fall in gas prices because of weakening markets for oil and coal. Goldman Sachs, the investment bank, said that it was lowering its UK and US natural gas price forecast to reflect the economic outlook and weakening demand for oil.

The weakening outlook is still not reflected in forward prices for gas next year. Yesterday, the price for gas to be delivered in the first quarter of 2009 was 84p per therm, reflecting a perceived risk premium for supply disruption and cold weather.

Another factor keeping prices high is the link to oil because the British market is connected to mainland Europe by pipeline, where gas is priced on oil-based indices, not on spot markets.

The sudden price collapse is good news for consumers, as it indicates that the British spot market can sever its link from oil-based pricing and reflect underlying supply and demand.

According to ICIS Heren, if the gas price were fully linked to an oil index, it would be trading close to 70p per therm.

— Iraq has opened the way to foreign investment in its oil industry as the country's Oil Minister held talks in London yesterday with 34 oil companies, including BP, Shell and Total.

The talks, presided over by Hussain al-Sharistani, the minister, focused on the terms of 20-year service agreements to operate some of the biggest oil and gasfields that have been put up for tender by the Iraqi Government.

Iraq's oil reserves, estimated at 115 billion barrels are the third-largest in the world after Saudi Arabia and Iran.

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