Caspian Energy Journal Caspian European Club
Monday, 01 October 2018 11:00

Wholesale gas prices near the highest levels in a decade

Wholesale gas prices near the highest levels in a decade

October’s arrival marks the first day of winter in the world of natural gas trading. What’s unusual this year is that wholesale prices are already near the highest levels in a decade -- even before the season’s first cold snap. Those rising costs are set to boost the price of heating homes and powering industry, which is already under scrutiny from politicians in London and Berlin, Caspian Energy News ( reports with reference to Bloomberg.

The surge stems from European policy makers’ efforts to increase penalties for coal burning at the same moment that China draws more clean fuels to clear its smoggy skies. That means gas-fired generators, Asia importers of liquefied natural gas and storage sites in Europe still restocking after last year’s harsh winter are all competing for the same supplies.

Prices have strengthened across Europe. Dutch gas surged 60 percent since March, while contracts for U.K. winter fuel have doubled in two years. On top of that, levels at the region’s gas storage sites are at their lowest for the time of year since 2013.

In Germany, wholesale electricity rates for 2019 hit a record high as coal neared $100 a ton, the most in five years. Carbon emission permits are near their highest in a decade after reforms that will reduce supply of the pollution rights.

 “This winter could be the most interesting in years,” said John Twomey, a gas analyst at Bloomberg New Energy Finance in London. “If we have a sustained cold period, Europe may need to price high enough to attract additional supply from the global LNG market.”

The cost of shipping LNG is jumping, too. High demand in Asia and fewer available ships boosted shipping rates close to $100,000 per day for the first time since January 2014. That’s unusual for this time of year, when demand for the super-chilled fuel typically subsides.

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