British Gas owner Centrica has warned of a 'difficult environment' for UK retail gas suppliers in 2008. The warning follows rising wholesale gas prices.

The company expects its industrial and commercial gas supply contracts to make further losses in 2008. It revealed these contracts moved back into a loss position in the fourth quarter due to higher gas prices.

Some analysts had expected retail gas price rises for UK residential customers in 2008. However, Centrica, which reduced gas prices twice earlier this calendar year, said that it was monitoring the situation before making any decision.

The higher wholesale gas prices have reduced margins for gas and power sales in the UK residential market, the statement said.

It said high wholesale prices would, if sustained, create a more difficult environment for retail energy suppliers in the UK going into 2008.

'We will continue to monitor this with regard to future pricing policy,' the company added. Centrica's upstream assets are expected to perform well, with 2007 hydrocarbon production levels likely to exceed 2006.

The company's power generation segment is expected to be around break even in the second half, with the result impacted by lower realised spark spreads and higher levels of plant outages.

Centrica said its pretax results will be in line with its expectations, with thinning margins for British Gas offset by Centrica's upstream performance. Centrica will announce its full year results on 21 February. Shares remained steady at 363.8 pence.