Citi reacted with surprise today as natural gas prices continued to rise to levels unheard of.
A day ahead Natural gas prices jumped another 78p to 355p per therm today, a rise of nearly a third in a matter of hours. Jim Reid, a strategist at Deutsche Bank analyst, called the price move “astonishing”.
UK natural gas prices have been rising steadily since the summer, repeatedly hitting new all-time highs. The gas is already well above the previous record of 120p per therm, when a “Beast from the East” cold front battered the British Isles in 2018. So far this year, the prices have gone up by about 500 per cent.
Skyrocketing energy prices are raising fears about the impact on the economy. Factories have already been forced to close due to cost and consumers could face rising bills next year when the next review of the energy price cap is carried out.
“It’s a big deal,” said George Saravelos at Deutsche Bank. “The importance of these moves on inflation, growth and external accounts should not be underestimated.”
An ominous constellation of factors has caused natural gas prices across Europe to soar. An unusually bad year for wind power coincides with a long winter and hot summer that depletes gas supplies across the continent. With China and Latin America buying up global suppliers of liquefied natural gas, a Covid reopening is fueling demand. Supply from Russia has also been weak.
Experts fear a cold winter could push Europe and Britain into an energy crisis.
Russian President Vladimir Putin said this week that the “hysteria” in the market was due to a messy approach to net zero adopted by the West.
“Some people are speculating on climate change issues, some people are underestimating certain things, some are cutting back on investment in extractive industries. A smooth transition is needed,” he added According to a Reuters report.