Economy|Fossil Fuels
Energy crunch: Natural gas prices in Europe hit record 100 euros
Natural gas prices in Europe hit a new record of 100 euros ($116), threatening to derail the economic recovery there.
European gas storage sites are just under 75 percent full, the lowest level for this time of year in more than a decade [File: Getty Images/picture alliance via Bloomberg]
By Anna Shiryaevskaya and Vanessa Dezem and Elena MaznevaBloomberg
1 Oct 2021
European gas surged to a record 100 euros as China stepped up a global fight for energy supplies, in a move that threatens to derail the economic recovery. Prices later retreated.
In volatile trading, benchmark futures gained as much 2.3% on Friday before retreating. China ordered its state-owned energy companies to secure supplies for this winter at all costs, according to people familiar with the matter. That will intensify a battle for liquefied natural gas and coal cargoes just as flows into Germany via a key Russian pipeline tumbled.
Energy prices are rising from the U.S. to Europe and Asia as the economy recovers from the global pandemic and people return to the offices. Europe is struggling to secure enough gas and coal ahead of the winter, with rising prices forcing some of industrial giants from fertilizer producers CF Industries to Yara International ASA and chemicals giant BASF SE to shut plants or curtail output.
Governments are struggling to respond to the crunch, with an increasing number taking steps to try to shield voters from the worst effects of rising prices. France will block any new increase in regulated gas tariffs and cut taxes on electricity, Prime Minister Jean Castex said on TF1 on Thursday.
“The volatile trading already shows that no one really knows how high gas can go, but we’re definitely in for a wild ride,” said Niek van Kouteren, a senior trader at PZEM, a Dutch energy company. “The question will be: where there will be demand destruction? If you then see governments stepping in and subsidizing gas prices, like France announced yesterday, there is no incentive at all to lower your demand.”
Dutch gas futures surged to 100 euros a megawatt-hour, before retreating 0.7% to 97 euros by 1:05 p.m. in Amsterdam. Prices were swinging between gains and losses as traders weighed the potential for demand curbs as more factories shut or reduce production.
Storage Sites
European storage sites are just under 75% full, the lowest level for this time of year in more than a decade. Inventory withdrawals typically start by the end of the month, depending on the weather. So far, temperatures in northwest Europe are forecast to be largely within seasonal norms in October.
Flows from top supplier Russia into Germany’s Mallnow via the key Yamal-Europe pipeline also dropped just as the heating season begins. At an auction on Thursday, no extra pipeline capacity was booked to deliver fuel to the Mallnow compressor station the following day.
“Gas can go now as high as it needs to knock demand out,” said Andreas Gandolfo, leader of the European power team at BloombergNEF. “For some European industries gas has become too expensive. For some, including us, who have gas heating at home, it can probably go a lot higher before there is a decision to switch off.”
The treat of more industrial closures in Europe also risks stalling the rally in European carbon futures. Some of the companies curtailing production or closing factories are energy-intensive users and need to use carbon permits to cover their emissions. The slowdown could lead them to sell their allowances, said Trevor Sikorski, head of natural gas and energy transition at the London-based consultants Energy Aspects.
Carbon prices rose, adding 2.8% to 63.48 euros a metric ton, while German power gained 3.8% to 134.20 euros a megawatt-hour.
In Asia, the price of liquefied natural gas surged to a record $34.47 per million British thermal units on Thursday. Both the cost in Asia and in Europe are about $190 a barrel of crude oil equivalent.
“Longer term, prices are of course unsuitable high and we do expect gradual normalization next year,” said Oystein Kalleklev, chief executive officer of Flex LNG Ltd. “But with empty inventories there will be a fight for restocking next summer so it will take a bit more time for the market to rebalance.”
OPEC says oil will re­main num­ber one, de­spite green en­er­gy push
Lat­est World Oil Out­look warns that fail­ure to keep in­vest­ing in fos­sil fu­els could risk geopo­lit­i­cal in­sta­bil­i­ty.
28 Sep 2021
En­er­gy crunch: Three more UK pow­er firms col­lapse
More than 1.7 mil­lion Unit­ed King­dom cus­tomers have lost their en­er­gy sup­pli­er, as nat­ur­al gas prices break records.
29 Sep 2021
Chi­na pow­er cuts, UK petrol woes: Why is there an en­er­gy crunch?
En­er­gy short­ages in Chi­na, the Unit­ed King­dom and Eu­rope are caus­ing sig­nif­i­cant dis­rup­tions.
29 Sep 2021
Could Chi­na’s pow­er cri­sis help or harm its green en­er­gy push?
Chi­na is the world’s biggest pro­duc­er and con­sumer of coal, and right now its in­ven­to­ries are at record lows.
1 Oct 2021
International airlines suspend some flights to US over 5G
Turkey signs $5bn swap deal with UAE, boosting foreign reserves
Wage gap: LGBTQ workers in US earn 10% less than average workers
Turkey: Kirkuk-Ceyhan pipeline operational after fire put out
How real is Russia’s threat to deploy missiles to Latin America?
Blinken pledges ‘relentless’ diplomacy over Ukraine
‘Revenge’: Israel demolishes Palestinian home in Sheikh Jarrah
UK: Johnson fights for his premiership after MP defects to Labour
Follow Al Jazeera English:
© 2022 Al Jazeera Media Network
You rely on Al Jazeera for truth and transparency
We understand that your online privacy is very important and consenting to our collection of some personal information takes great trust. We ask for this consent because it allows Al Jazeera to provide an experience that truly gives a voice to the voiceless. You have the option to decline the cookies we automatically place on your browser but allowing Al Jazeera and our trusted partners to use cookies or similar technologies helps us improve our content and offerings to you. You can change your privacy preferences at any time by selecting ‘Cookie preferences’ at the bottom of your screen.To learn more, please view our Cookie Policy.