LONDON – Gas prices in Europe and the United Kingdom hit an all-time high on Tuesday, owing to strong winter demand and simmering geopolitical tensions between major supplier Russia and consumption countries.
Europe’s point of reference In late-morning trades, the Dutch TTF gas price touched 162.775 euros/megawatt-hour, up more than 10% from Monday, while UK prices jumped to 408.30 pence/therm.
Both markets shattered prior highs set in October, owing to concerns about demand in the northern hemisphere winter months. They are now around seven times higher than they were at the start of 2021.
Runaway spot gas prices, coupled with other high-priced commodities such as crude oil, have fueled growing concerns about global inflation.
In a client letter, Deutsche Bank analysts noted that European gas “continued its relentless ascent… to another record.”
“It comes as temperatures have continued to drop as we approach the European winter, and we also learned that (Russian energy behemoth) Gazprom had not reserved any additional capacity for gas going through Ukraine in January.”
“That’s a big story coming into the winter with ramifications for European economy, and investors will be watching weather predictions intently to see what happens.”
Last year’s lengthy winter had already drained Europe’s gas reserves. To make matters worse, this year’s wind power supply has been drastically cut due to calmer weather conditions.
Some observers attribute the market’s rise to the continuing debate over Russia’s proposed Nord Stream 2 gas project.
If Russia attacks Ukraine, German Economic Affairs Minister Robert Habeck warned on Saturday that the Nord Stream 2 gas pipeline from Russia to Germany will face “grave repercussions.”
The Baltic Sea pipeline would treble Russia’s supply of low-cost natural gas to Germany, which the European Union’s largest economy claims it needs to help it shift away from coal and nuclear power.
However, the 10-billion-euro ($12-billion) project has been plagued by delays for years, drawing harsh criticism from Germany’s eastern EU allies such as Poland and the US.
Critics claim that Nord Stream 2 would strengthen Europe’s reliance on Russian gas, while Ukraine has referred to it as a “geopolitical weapon.”
Russia provides one-third of Europe’s overall gas supply.