Cold snap see European gas prices soar as supply options dwindle

23rd February 2018 | Commercial Energy

Prices in Europe’s biggest gas markets surged 50 percent this week ahead of a cold snap that will test the region’s reduced supply options and make price spikes more likely as stocks run low. A late winter blast of cold in north-west Europe has left traders scrambling for gas in British, Dutch, Belgian and French markets after several setbacks to quick sources of supply in the region.

These include new limits on output at Europe’s biggest gas field in Groningen, the Netherlands, and utility Centrica’s decision to close Britain’s biggest gas storage site. Gas stockpiles held in underground sites in Britain, Belgium and France are at their lowest since at least 2015 and liquefied natural gas (LNG) shipments are scant following increased demand from Asia.

Gas prices

In Britain, day-ahead gas price rose near 50 percent this week as plummeting temperatures boosted demand for gas which is used to hear up to 80 percent of the country’s homes. Traders said demand next week could reach the highest since 2010, when Britain saw near record demand as temperatures in some parts of the country fell below minus 20 degrees Celsius.

France, Belgium and the Netherlands face similar challenges. “A cold easterly flow will bring increasingly colder air from north-eastern Europe,” meteorologist Georg Muller said. Britain’s gas market in particular is bracing. “The UK is much more at risk to spiking prices given the limited levels of seasonal storage that has been caused by the closure of Rough,” said Energy Aspects analyst Trevor Sikorski.

Centrica decided last year to close the more than 30 year old Rough site, which at its operational peak could hold around 10 percent of the country’s gas demand.

“With storage quite low and domestic supplies, including the lack of Rough, lower (Dutch gas output from Groningen) and low liquefied natural gas imports, there is a lack of flexibility across the whole of Western Europe,” a gas trader said.

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