Continental gas prices begin to subside as fears over shortages ease

EUROPEAN gas prices have hit their lowest level in four months as high storage levels and hopes for a mild winter ease concerns about shortages.

Storage facilities across the EU are now 92pc full, according to the latest available data, far exceeding the bloc’s target of 80pc by Nov 1.

In another boost, early long-range weather forecasts have predicted that although a cold snap in December is likely, temperatures this winter overall are expected to be milder than usual.

It prompted the European benchmark price for gas to fall further to €118 (£103) yesterday, the lowest level seen since June and dramatically down from August’s peak of €339.

Nathan Piper, an oil and gas analyst at Investec, said the fall in prices was also due to better-than-expected output from renewable energy sources such as wind, which has reduced the need for gas in recent weeks.

He added: “It is providing a bit of a breather ahead of the winter, when temperatures are going to fall and demand for gas will increase again.

“At the moment, all these things are coming together to bring prices down.”

Mr Piper cautioned, however, that the respite would not last forever, with forward prices for next year currently trading at levels above the day-ahead benchmark.

“It is going to be higher through most of 2023”, he added, “so this is probably going to end up being more of a temporary respite.”

Falling gas prices have come as a boost to the UK Government, which is exposed to the market through the “energy price guarantee” extended to all households until April.

Investec’s Martin Young on Monday said the scheme was now expected to cost £28bn over that period, rather than the original £60bn predicted by the Treasury. The improving picture across Europe will also benefit Britain, which relies on piping gas from storage facilities in the Continent during the winter each year.

In a warning this week, the International Energy Agency warned that keeping storage facilities at least one third full was essential to mitigate the risks of Russia cutting off supplies completely and a cold snap near the end of the heating season.

Countries including Germany and France have been scrambling to reduce their exposure to gas before temperatures fall, with the French stateowned energy giant EDF seeking to ensure more nuclear power stations are brought back online and Berlin ordering nuclear power stations that had been due to close to stay open.

In the UK, coal power stations that had been due to shut this year have also been asked to be ready to provide backup power.

Earlier this month, the National Grid warned that both households and businesses are at risk of being cut off this winter if Britain is unable to import enough energy.

It said a worst-case scenario could include “load-shedding”, where power is restricted to different areas at different times to prevent uncontrolled outages. Homeowners will be asked to use their washing machines and other electricity appliances at night to help avert potential disruption during peak hours.

Under other contingency plans, households and businesses could be handed £10 a day to stop using electricity when needed.

‘It is going to be higher through most of 2023, so this is probably going to be more of a temporary respite’