Cold snap hits gas prices

Having reduced the bank holiday to a washout, Britain's cold, wet weather is taking its toll on energy markets, with UK natural gas prices rising steadily this week.

Gas for next-day delivery rose 1.50p per therm to 22.40p yesterday, a 10 per cent increase on a week ago. Analysts said a sudden jump in demand, coupled with reduced gas flows through key Norwegian and Dutch pipelines, was responsible for the increase. The gains pushed up wholesale power prices, with electricity rising by 4 per cent yesterday alone.

Rob Laughlin, at Man Financial, said: "We're not dramatically short, but there's not a tap you can just turn on as there's a call for gas elsewhere."

Mr Laughlin, however, was confident this was not the start of a sustained price rise, and said prices should fall back when the weather improves. "There's no reason to believe this will lead to higher household energy bills landing on your doormat," he added.

The pick-up in prices comes after a warning from the International Energy Agency last week that the West faces a chronic gas shortage unless more money is poured into investment.

Saudi Arabia said yesterday it is stepping up exploration to boost its natural gas reserves by around 40 per cent in the next 10 years as it prepares to meet rising domestic demand.

The kingdom, home to the world's fourth-largest reserves, plans to drill 186 exploration wells and 332 development wells by 2012.