Despite being in the energy market will only be temporary, experts warned today.
UK gas prices hit a record low yesterday before falling around 100p per therm after Russian President Vladimir Putin agreed to supply more to Europe. He was reluctant at first and linked more supplies to European approval of the new Nordstream 2 pipeline.
Days-ahead gas futures were down 13p to 218p per therm this morning. The price had climbed up to 355p per therm on Wednesday.
Experts said the upward pressure on prices is likely to continue even as supplies increase.
“Winter is barely a week old and global demand remains strong, supply tight – it’s a long way off,” said Henry Edwards-Evans, an energy expert at S&P Global Platts. “No one can say where prices will settle – price movements are very volatile and responsive to relatively modest news flows.”
Dan Starman, head of assets and infrastructure at Cornwall Insights, said: “If the volumes exported by Gazprom are substantial and sustained, they could somewhat ease immediate supply and demand concerns.
“However, any sustained and particularly cold weather in winter will have a strong upward impact on prices as the market looks to source increased volumes with lower than average storage levels.
“Fundamentally, the global gas market is very tight, and we expect prices to rise for some time against the backdrop of 5-10 years.”
Gas prices are well above normal levels and nearly double the previous record high during the “beast from the east” in 2018.
“We shouldn’t get ahead of ourselves here, because even after the latest reversal, prices are still up more than five times,” said Jim Reid, a strategist at Deutsche Bank.
The UK’s National Grid Gas Transmission said today it would be able to get enough gas to Britons and their businesses over the winter, allaying fears of a blackout.
“We have a wide variety of tools available to manage any operational requirements we may encounter,” said Ian Radley at the organization.
Questions remain about the price at which the gas will be delivered. If costs continue to rise, factories may be forced to slow production or shut down completely. Which will have an impact on the entire economy. The government was forced to close a fertilizer plant because its closure caused a national CO2 deficit.
Elsewhere, Shell said that while Hurricane Ida cost $400 million after an August storm that forced it to temporarily shut down operations in the Gulf of Mexico, third-quarter production of liquefied natural gas was also lower than expected. Markets are likely to be, which is more bad news.