House­holds and busi­nesses to pay more for en­ergy as gas price soars

The Sunday Telegraph - Money & Business - - Business - By Jil­lian Am­brose

EN­ERGY bills are ex­pected to rise when the tem­per­a­ture falls this win­ter, as the price of gas soars amid a squeeze on sup­plies and stor­age.

The price for win­ter gas is close to 50pc higher than it was this time last year and ex­perts ex­pect prices to rise fur­ther, with costs passed on to house­holds and busi­nesses.

Sup­ply jit­ters have un­set­tled the mar­ket in the wake of a cold spring, while the ris­ing price of oil and car­bon al­lowances drive costs higher still. Al­though ma­jor en­ergy com­pa­nies typ- ically buy about half their gas a year be­fore it is used, many smaller firms se­cure a tenth of their sup­ply in ad­vance, threat­en­ing higher bills for con­sumers or fi­nan­cial strain for providers.

In the UK mar­ket, win­ter gas prices are 71.75 pence per therm com­pared to 48.85p/th ahead of the pre­vi­ous win­ter.

Dutch and Ger­man traders are pay­ing €25.58/MW (£23.13) for win­ter gas com­pared to €17.02/MW this time last year. Even buy­ing gas one month in ad­vance com­mands prices not seen since early 2015. En­ergy mar­kets are rid­ing high af­ter Euro­pean gas stores were de­pleted by the freez­ing tem­per­a­tures brought by the “Beast from the East”. Lo­cal gas pro­duc­tion has also con­tin­ued to fall. Gas stores stand only 58pc full, com­pared with 77pc this time last year and de­spite sub­stan­tial in­jec­tions over the sum­mer.

The task of re­plen­ish­ing these stores has be­come more dif­fi­cult be­cause North Sea pro­duc­tion is dwin­dling and global gas players would rather sell in Asia where re­turns are higher.

US en­ergy gi­ant Conocophillips said last week that its Thed­dlethorpe Gas Ter­mi­nal in Lin­colnshire sup­plied its last gas to the grid ear­lier than ex­pected af­ter 46 years of pro­duc­tion.

Mean­while, gas pro­duc­tion from the Nether­lands is due to fall by a quar­ter com­pared to last year af­ter the govern­ment agreed to wind down out­put from the gi­ant Gronin­gen gas field fol­low­ing earth­quakes, af­ter decades of drilling.

Ship­ments of gas via su­per-chilled tankers of liq­ue­fied nat­u­ral gas are likely to re­main in short sup­ply as sell­ers di­vert car­goes to Asia, where prices are as much as a quar­ter higher than in Europe.

“The mar­ket tends to re­mem­ber the pre­vi­ous win­ter best,” said Oliver Sanderson, a gas an­a­lyst at Thom­son Reuters. The fears among the grow­ing gang of smaller sup­pli­ers in UK and Euro­pean en­ergy mar­kets that a re­peat of last win­ter’s bit­ter cold and pipe­line out­ages might be on the cards could be driv­ing prices higher still.

“When a bas­ket of players – in­clud­ing newer, smaller util­i­ties – is com­ing into the mar­ket and are ner­vous about ris­ing prices, this may add to the bullish­ness and drive up prices fur­ther,” said Mr Sanderson.

“When you add in­vest­ment funds, which take an ag­gres­sive view on ris­ing en­ergy prices, this com­pounds the ef­fect.”

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