Gas prices have spiked amid continued concerns over supply shortages, as the West scrambles to secure energy supplies ahead of winter.
Sustained fears that Russia could turn off the taps of key gas flows into Europe has kept prices historically elevated on UK and European benchmarks, with Kremlin-backed gas giant Gazprom lessening flows into the continent over recent weeks.
UK Natural Gas prices were up 13 per cent this afternoon, while the Dutch TTF Futures benchmark was up five per cent.
Russia has retaliated to Western sanctions on its energy supplies following the country’s invasion of Ukraine.
It has already cut off gas flows into multiple European countries which refused to comply with demands for contracts to be paid roubles , which were signed into law by Russian President Vladimir Putin.
While the country has committed to serving global markets, there are concerns it could cut off flows beyond the scheduled maintenance for the Nord Stream 1 pipeline between 11-21 July.
There have already been sixty per cent cuts in flows via the pipeline this month, triggering crisis talks between utility giant Uniper and the German government – raising the prospect of it being partly nationalised.
Tough winter ahead for the West
The European Union is dependent on Russia for around 40 per cent of its supplies, meaning any supply shocks could severely hamper attempts to maintain supplies this winter.
The bloc has finalised plans to sanction Russian seaborne oil shipments and coal imports, but only Lithuania has brought in restrictions on the country’s gas flows.
It has spent €28.4bn on Russian natural gas since the country invaded Ukraine in February, according to the data from Centre for Research on Energy and Clean Air.
The bloc’s executive arm is pushing for member states to fill up gas tanks to 80 per cent capacity ahead of winter, with storage currently at 60.2 per cent according to iGas.
The UK is only dependent on Russia for four per cent of its imports, but lacks storage and would likely find itself competing with other buyers for its usual gas supplies if Russia turned off the taps.
Reflecting the state of alarm in Downing Street, the Government has approved a deal between the National Grid and Drax to extend the life of its coal-fired power plant over winter.
This follows a similar agreement to expand the shelf-life of EDF’s coal-plant West Burton A Power Station last month during the coldest months of the year.
Ofgem has warned the price cap is expected to rise to at least £2,800 per year in October, with household bills already at a record £1,971 per year.
The regulator has proposed a quarterly price cap, and energy specialist Cornwall Insight has forecast that the cap will climb over £3,000 per year in January if the change goes ahead – with soaring wholesale costs continuing to drive up energy bills.