NATURAL gas prices hit record highs early yesterday before plummeting after Vladimir Putin said he would ramp up gas supplies to Europe.
November natural gas futures contracts scaled to a record high of 404p per therm, the first time they have ever breached the £4 mark. In the last year alone, prices have risen by nearly 1,000 per cent.
But after a 30 per cent explosion in early trading, the price fell back to below yesterday’s close driven by Vladimir Putin indicating he would consider “possibly increasing supply in the market” by increasing gas supplies through Ukraine.
Putin has come under recent pressure after a host of European politicians accused the state-owned energy firm Gazprom of manipulating prices in order to speed up approval of the controversial Russia-to-Germany Nord Stream 2 pipeline.
Russian Deputy Prime Minister Alexander Novak yesterday said that the pipeline’s approval by EU regulators would “cool off” the extraordinary spike in gas prices.
Senior Russian figures have denied they are engaged in any manipulation of the market.
The upsurge in natural gas prices is intensifying the cost of living crunch looming over UK households. On top of a national insurance tax hike coming down the line and inflation expected to top four per cent, energy bills could jump by around a third next summer, analysts estimate.
Cornwall Insights predict the UK’s energy cap – the maximum suppliers can charge households on a default tariff – could rise to £1,660 in 2022.
The unprecedented price hike has led to “out-right demand destruction for the first time in over two decades, particularly in the UK,” James Huckstepp, gas expert at S&P Global Platts, said last night.
“Extremely high global gas prices are now incentivising significant fuel switching away from gas (to coal and liquids)… demand switching/destruction is necessary to balance a market short on storage and supply.”
The energy price hike is already putting pressure on manufacturers, some of whom have already reined in production.
The wholesale price hike has sent a number of UK energy suppliers to the wall in recent weeks.