A day before the official start of the winter heating season, Europe’s natural gas and power prices surged again to fresh record highs on Thursday amid concerns about low supply and forecasts of lower than normal temperatures in the UK.
The gas price at the Dutch TTF hub, the benchmark gas price for Europe, soared by 13.4 percent to 98.23 euros per MWh on Thursday, while the price at the UK National Balancing Point (NBP) virtual trading point reached another record high, jumping by 17.4 percent to 252.53 pence/term.
Prices are extending gains from earlier this week when they jumped 10 percent on Tuesday to the then-record highs amid multi-year-low European gas inventories ahead of the winter season.
Europe is low not only on natural gas supply as the heating season begins on October 1. Coal is also in short supply as some utilities are forced to switch to coal from gas due to the surging gas prices. Coal prices are also surging amid a tight global market supply with Chinese demand booming and with high EU carbon prices.
Officials at Russian companies tell Bloomberg that European utilities are asking for coal. But Europe may not get much incremental coal supply soon as Russian coal exports are constrained just as gas deliveries are.
As a result, power prices in Europe are also soaring, with French and German electricity prices for next year hitting records on Thursday, according to Bloomberg estimates.
“European gas prices continued to rise rapidly yesterday. Flows from Russia are reduced and the supply fears are growing further following a fire on a Malaysian LNG complex yesterday. Both on the day ahead market and on long-term contracts, prices are climbing rapidly, and the fiercely bullish sentiment affects all the related markets heavily,” analysts at Energi Danmark wrote in a note on Thursday.
“While US gas prices are down 12% from Monday’s multi-year peak, a relentless rally continues in EU and Asian gas with both now trading around $30/MMBtu with tight supplies and the bidding war for LNG shipments continuing to drive prices higher,” Saxo Bank said today.
By Tsvetana Paraskova for Oilprice.com
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