Wholesale natural gas prices have risen by more than 40% this month as a raft of pressures, described by one analyst as a “perfect storm”, threaten to raise energy bills ahead.
Day-ahead prices for UK delivery were at a six-month high on Friday, a rise of more than 14% on the day, as contracts across Europe rose according to LSEG data.
Europe has witnessed a price spike this year as cold weather and low gas storage levels combined with slowing deliveries of liquified natural gas (LNG), mainly from the US.
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Contracts for the coming months also rose sharply.
The UK February delivery price was more than 8 pence per therm higher on the day at more than 98p.
Gas Infrastructure Europe data suggested that storage levels were at just 52% capacity.
A relatively quiet start to the European winter saw natural gas costs in early January fall to their lowest level since stocks were being replenished late last spring.
But colder weather across northern Europe has prompted a spike in use and given rise to fears that supplies are vulnerable due to the LNG squeeze, partly blamed on shipments diverting to Asia, where costs are often higher.
Arne Lohmann Rasmussen, chief analyst at Global Risk Management, said the market had been hit by a “perfect storm” of cold weather forecasts, depleting storage, geopolitical risk in Iran and speculative trading activity that had seen short positions closed.
Long-range forecasts suggest a plunge in temperatures towards the end of the month, with lower wind speeds exacerbating the situation as green infrastructure would be unable to fill the void despite record capacity.
