By Teddy Nwanunobi
European gas prices surged again, bringing their gains over just two days to 60 per cent, as the impact of soaring energy costs rippled through equity and bond markets and the European Union sounded the alarm, Bloomberg reported on Wednesday.
Dutch and UK gas futures have continued to hit fresh records along with rising power prices, the report added.
Rocketing energy costs are stoking inflationary pressures and fueling concern that economic growth will slow, prompting a slump in European stocks.
“The UK equivalent rose as much as 39 per cent, hitting an unprecedented 407.82 pence a therm, before easing back to 335.81 pence”
“It looks like a classic short squeeze to me. I expect we’re going to see some traders going bankrupt and liquidating their positions,” a senior analyst at BCS Global Markets, who expects the latest spike to be short-lived, Ronald Smith, said.
Global gas and coal markets have tightened just as the heating season starts in the northern hemisphere, with limited supply failing to catch up with recovering demand.
Colder weather is forecast for Europe next week, with temperatures across the mainland set to drop below normal levels.
Several European countries, including France and Spain have called on the EU to take urgent action to cushion the blow of sky-high gas prices.
The bloc’s energy chief, Kadri Simson, has pledged a revision to market rules by the end of the year to prevent surging costs from stifling the economic recovery.
“This price shock cannot be underestimated. It is hurting our citizens and in particular the most vulnerable households, weakening competitiveness and adding to inflationary pressure,” Simson told members of the European Parliament during a debate on the crisis.
With the gas crisis worsening by the day, some energy-intensive companies have shuttered operations because they are becoming too expensive to run.
With Europe’s stockpiles at their lowest seasonal level in more than a decade, deliveries from Russia limited and global competition for liquefied natural gas intense, the squeeze will only worsen as winter approaches.
Front-month Dutch gas jumped as much as 40 per cent to a record 162.125 euros a megawatt-hour after closing up 20 per cent the day before.
It traded at 131.10 euros as of 1:01 pm in Amsterdam.
The UK equivalent rose as much as 39 per cent, hitting an unprecedented 407.82 pence a therm, before easing back to 335.81 pence.
“This is just ridiculous. Almost impossible to even justify or qualify how and why it’s moving so fast and so high,” an analyst at ICIS, Tom Marzec-Manser.
Bloomberg Economics expects inflation in the euro area to average almost 4 per cent in the fourth quarter, significantly more than forecast by the European Central Bank at the start of the year.
Europe has continued to vie with Asia for deliveries of LNG.
Despite the eye-watering rally in European gas prices, Asian LNG importers remain willing to pay a premium to the Dutch benchmark to attract supply for the winter, according to traders in Singapore.
That means Europe will still struggle to lure extra LNG shipments to provide relief for the region.
“We are currently (living in exceptional) circumstances. The world gas market has never been in a situation where Asia and Europe were obliged to compete fiercely for the marginal LNG cargo available – as the latter was supposed to benefit from comfortable pipeline supply,” analysts at consultant Engie EnergyScan said in a note.