Plunging temperatures and a supply squeeze sent UK wholesale gas prices soaring to their highest level in nearly six years yesterday, as Europe shivered in the grip of the big freeze.
As a host of European cities endured sub-zero conditions, Italian ministers raised the alarm at a "critical" shortage of gas while the UK also became France's biggest energy supplier for the first time. Germany – usually the biggest exporter of electricity to France – held back generating capacity as the temperature dropped to minus 12C in Berlin.
Russia's move to cut gas exports by 10 per cent last week added to the supply crunch, as the mercury sank to minus 10C in Moscow.
Analysts at gas market intelligence company ICIS Heren said the price of wholesale gas for next-day delivery hit 93p a therm in frenetic trading, the highest since March 2006.
The price spike is all the more significant because the UK has more sources of supply than six years ago, such as major liquified natural gas import terminals at Milford Haven and the Isle of Grain. However, the freeze has also prevented many Russian ships leaving ports with gas supplies.
Rough, the UK's biggest offshore gas storage facility, has been pumping the maximum 45 million cubic metres (cu m) of gas into the UK's network for the past five days. The Centrica-owned facility, 18 miles off the Yorkshire coast, is currently two-thirds full, containing 2.3 billion cu m of natural gas.
Daily demand was forecast at 396.6 million cu m, 68 million cu m above the seasonal norm, according to National Grid data, and 13.4 million cu m short of expected supplies, implying the need for withdrawals from storage.
ICIS Heren's Ed Cox said: "There is an element of panic out there at the moment. People are expecting the price to be 20p lower next week, if this cold spell remains [the high prices] could continue. The cold weather has hit everywhere from Spain all the way to Russia."