The benchmark natural gas prices in the UK and Europe jumped by another 10 percent to fresh record highs on Tuesday as energy commodities rally amid multi-year-low European gas inventories ahead of the winter season.
The front-month Dutch TTF Gas Futures, the benchmark for European gas, have jumped to €85/MWh, up from €76.875/MWh on Monday afternoon, pushed higher in part by the contract rolling off this week.
Price at the UK National Balancing Point (NBP) virtual trading point reached another record high.
The Q4 UK price rose by 16.30 pence to 213.00 pence per therm, its highest level on record, according to Reuters estimates.
Falling temperatures in the UK and in parts of the rest of Europe, as well as falling supply from Russia via the Yamal-Europe, pushed gas prices higher on Tuesday.
Grid operator Gascade said that natural gas supply through the pipeline more than halved on Tuesday from Monday, but Russian giant Gazprom told Reuters that the supply drop was “a temporary situation, related to (gas supply) requests by a client. Requests are fully meet.”
The EU carbon contract also hit a record high on Tuesday at 65.30 euros ($76.30) per ton.
“To put the current elevated prices in Europe into perspective, the price of Dutch TTF first month gas has risen to near €85/MWh or $29/MMBtu or more than five times higher than the average seen during the previous five years,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said in a note on Tuesday.
The tight gas market has resulted in increased coal use for power generation, pushing up the price of coal delivered at Rotterdam to a multi-year high at $155/ton, or two times the average, Hansen added. The energy crunch is also raising the price of the carbon allowances in EU’s Emissions Trading System to four times the average price of the past five years, he said.
“Without a response from producers, the only other option is for prices to reach levels that triggers demand destruction. A development that may come at a heavy price given the risk to global growth, inflation and stock price valuations,” Hansen noted.
By Tsvetana Paraskova for Oilprice.com
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