* Weak demand offsets 24.4 mcm undersupplied system
* Q1 clean dark spread 20 pounds higher than clean sparks
* Curve prices pulled down by weakening oil market
LONDON, Sept 20 (Reuters) - British prompt gas prices moved sideways on Thursday morning as an undersupplied system, due to low Norwegian imports and scheduled liquefied natural gas (LNG) arrivals, was offset by weak demand.
Gas prices for within-day delivery rose by 0.1 pence per therm between Wednesday and Thursday morning to 61.20 pence per therm, while prices for delivery the next day were down by 0.1 pence to 60.90 pence a therm.
Despite cooler weather, gas demand in Britain remained around 30 percent the seasonal norm at 176.9 million cubic metres (mcm), according to National Grid.
But with flows only expected at 152.5 mcm, the system was seen to be 24.4 mcm short, making imports or storage withdrawals necessary.
Britain's gas storage sites are currently filled to an average of 94.37 percent, according to data from Gas Infrastructure Europe, down from almost 98 percent at the beginning of the month.
Traders said that the low demand was a result of Britain's weak economy and because gas-fired power generation is less profitable than coal.
"Those utilities that can switch between coal and gas switched to coal in early 2012 and have been firing coal from all holes ever since then," one utility trader said.
Coal-fired electricity generation for baseload (24 hours) delivery in the first quarter of 2013 is now almost 20 pounds per megawatt-hour (MWh) more profitable than power produced from gas.
Healthy export levels from traditional exporters such as Colombia or South Africa as well as rising supplies from the United States, where a shale gas exploration boom has pushed coal out of the domestic market and into Europe, have led to an oversupplied coal market and helped pull prices down.
API2 2013 coal futures contracts have been in a downward cycle since summer 2011 and have dropped more than a quarter since then to under $100 per tonne.
At the same time, European gas markets are tight as buyers have to compete with Asian utilities for imports of liquefied natural gas (LNG) and pipeline supplies from Russia and Norway are also tight.
CURVE PRICES DROP WITH OIL
On the far end of the gas price curve, prices for delivery next winter dropped to 64.50 pence per therm, their lowest level since early August.
Traders said that the price drops were largely a result of even steeper falls seen in oil prices this week after reports of declining Chinese manufacturing activity.
Front-month Brent crude prices have fallen from over $117 per barrel at the beginning of this week to under $108 a barrel on Thursday morning.
"When there are such marked price movements in the oil market, it is hard to ignore them in other energy products so the trend is showing downward for power at the moment as well," one financial power trader said.
Earlier this week, oil markets were shaken by unusual trading activity that saw a single large sell order in the benchmark European Brent oil market, followed by an abrupt U-turn among high-frequency traders causing a huge price rout. (Reporting by Henning Gloystein; Editing by Alison Birrane)
