The price of natural gas in the UK and across Europe surged to a record high in several contracts on Tuesday afternoon as the market faced a “perfect storm” of cold weather, supply concerns and increased demand.
The November gas price at the Dutch TTF hub, a European benchmark, traded at a record €120.80 per megawatt on Tuesday afternoon - a rise of more than 26 per cent on the day before.
In the UK, wholesale gas prices for delivery in November increased by 14 per cent and peaked at £2.79 per therm. Meanwhile, prices for immediate delivery rose by 23 per cent to £2.50 per therm.
It marked a 32 per cent increase on Monday’s close and surpassed the previous £2.75 per therm high in March 2018 when a large anticyclone, nicknamed the ‘Beast from the East’, sent temperatures plunging.
The rise in gas prices has been blamed on a number of factors, including a cold winter that left stocks depleted, high demand for liquefied natural gas from Asia as countries emerge from Covid lockdowns and a reduction in supplies from Russia.
Nine British gas companies were last month forced into administration due to the price surge, leaving hundreds of thousands of Britons facing higher tariffs. The price hike has sparked fears that a cost of living crisis looms for many families this winter.
OGUK, representing the offshore oil and gas industry, reported that wholesale prices for gas have surged 250 per cent since January - with a 70 per cent rise since August alone.
Kwasi Kwarteng, the business minister, has faced criticism for prioritising the fate of larger energy suppliers. Speaking to Sky News last month, Mr Kwarteng said that the government was considering “a lot of options” to protect suppliers, including state-backed loans, but stressed that not all firms would benefit from emergency measures.
When a supplier fails, energy regulator Ofgem moves customers to another retailer to ensure that supplies continue and they do not lose money. A new supplier is then responsible for taking any credit balances a customer may have from their previous account.
Though the government imposes a price cap on suppliers to prevent them from overcharging customers, it is expected that the current cap will be lifted by ministers after the next review - with households likely to face higher bills as a result.
Vis Raghavan, JPMorgan Chase & Co’s top executive in Europe, told Bloomberg on Monday that the energy market is facing a “perfect storm” and there was “no certainty on when oil and gas prices will recover”.
Other industry leaders have claimed that the turbulence in the global energy market will eventually pass. “It might take a while, but the market will stabilise at sensible levels,” De la Rey Venter, executive vice president at LNG West, which handles Shell’s natural gas assets around the world, told a virtual conference on Tuesday.
Additional reporting by Reuters
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