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Putin pledge helps gas prices ease but expert warns: ‘This isn’t over’

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Gas prices eased after Russian President Vladimir Putin agreed to pump more supply to Europe (AP)
Gas prices eased after Russian President Vladimir Putin agreed to pump more supply to Europe (AP)

Respite in the energy market will only be temporary, experts warned today.

UK gas prices spiked to record levels yesterday before dropping around 100p per therm after Russian president Vladimir Putin agreed to pump more supply to Europe. He had at first been reluctant and tied more supply to European approval of the new Nordstream 2 pipeline.

Day-ahead gas futures were down 13p to 218p per therm this morning. The price had climbed as high as 355p per therm on Wednesday.

Experts said upward pressure on prices was likely to continue despite increased supply.

“The winter season is barely a week old and global demand remains strong, supply tight — this is far from over,” said Henry Edwardes-Evans, an energy expert from S&P Global Platts. “Nobody can say where prices will settle — price movements are too volatile and reactive to even relatively modest news flow.”

Dan Starman, head of assets and infrastructure at Cornwall Insights, said: “If the volumes exported by Gazprom are sufficient and sustained, they may alleviate the immediate supply and demand concerns somewhat.

“However, any sustained and particularly cold weather over the winter would exert a strong upward influence on prices as the market looks to source increased volumes with lower than average storage levels.

“Fundamentally, the global gas market remains very tight, and we anticipate elevated prices against the 5-10 year backdrop for some time.”

Gas prices remain far above normal levels and are almost double the previous record high reached in 2018 during the “Beast from the East”.

“We shouldn’t get ahead of ourselves here, since even with the latest reversal, prices are still up by more than five-fold since the start of the year,” said Jim Reid, a strategist at Deutsche Bank.

The UK’s National Grid Gas Transmission today said it would be able to get enough gas to Brits and their businesses over the winter, downplaying blackout fears.

“We have a range of tools available to manage any operational requirements that we might encounter,” Ian Radley at the organization said.

Questions remain about the price gas will be delivered at. If costs remain elevated, factories may be forced to slow production or shut altogether. That will have knock-on effects across the economy. The Government was forced to bail out a fertilizer plant after its closure sparked a national CO2 shortage.

Elsewhere, Shell said that Hurricane Ida cost it $400 million after the August storm forced it to temporarily shut operations in the Gulf of Mexico, Third-quarter production of liquefied natural gas is also likely to be lower than expected, which is more bad news for the market.

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