Soaring energy prices in Europe create “terrible” uncertainty

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LONDON-The wholesale natural gas market in Europe is facing constant volatility, which has raised concerns across the region that the energy crisis may get worse.

As of 1 p.m. London time on Wednesday, the price of natural gas at the TTF Center in the Netherlands has risen by about 5% in recent months, reaching 93.3 Euros per MWh, which is the benchmark for European natural gas trading. According to data from the New York Intercontinental Exchange, contracts for March and April delivery also rose 5% on Wednesday.

At the same time, according to data from Reuters, European prices have risen to 94 euros per MWh. Although a far cry from the December peak of approximately 182.3 euros, Wednesday’s activity still marked a significant increase in prices since the end of 2021, when prices fell below 70 euros per MWh.

According to a Reuters report, on Wednesday, Germany’s day-a-day base load electricity prices rose by more than 50%, while France’s electricity prices rose by 17% in early trading.

Previously, European benchmark natural gas prices soared by 30% on Tuesday due to concerns about the cold winter, low natural gas inventories and Russia’s restrictions on supply to Europe.

During 2021, European natural gas wholesale prices rose by more than 400%, setting a new record.

At the mercy of Russia?

Ole Hansen, Head of Commodity Strategy at Saxo Bank, told CNBC in an email that natural gas prices in the EU and the UK are still affected by weather, shipment speeds and Russia.

Hansen added: “In January, the price of natural gas has risen again, and the colder weather will drive the increase in heating demand, and the supply from Russia is very, very low, especially through the two important pipelines in Poland and Ukraine.” “Because of North Stream 2 It’s difficult to say whether Russia has deliberately reduced supplies due to the delay in pipeline approval and the Ukrainian border crisis. But it highlights the failed energy and storage policies in Europe and the United Kingdom, which makes the region very dependent on imported natural gas, especially considering the level of renewable energy generation. Still unreliable.”

The UK’s near-month natural gas contract rose nearly 6% on Wednesday, and the contract for delivery in April rose more than 7%.

At the same time, the price of the UK natural gas trading benchmark national equilibrium point rose by more than 10% to around 2.25 pounds per heat.

The UK is particularly dependent on natural gas as an energy source, and more than 22 million households are connected to the country’s natural gas network. The largest single source of natural gas in the UK is the British Continental Shelf, which will account for about 48% of the total supply in 2020. However, UCS is a mature source, which means it must be supplemented with natural gas imported from the international market.

“Horrible” prices for British companies

The UK imposes restrictions on the energy costs that suppliers can charge consumers, and the government reviews the price ceiling every six months. The next review will expire in February.

British Prime Minister Boris Johnson said at a press conference on Tuesday that the government “does not rule out” tax cuts and other measures to keep energy prices stable, but he questioned the effectiveness of this move.

The trade agency British Energy told the BBC in December that it expects the country’s energy bills to rise by 50% in the spring. Last year, the soaring wholesale cost of natural gas led to the closure of many British energy suppliers.

Several small and medium-sized companies headquartered in the UK told CNBC on Wednesday that higher energy bills will bring new blows to their already troubled companies.

Gillian Ferguson, the owner of Twisted Empire Bakes, said in an email: “I’m really afraid of rising energy costs.” “My supplier recently closed down. [our new provider] It is recommended that we increase the monthly payment by 90 pounds (122 U.S. dollars). I am a wholesale baker working from home and have a few ovens on the road-I’m not sure how long I can last to swallow the increments. “

At the same time, Craig Bunting, the co-founder of the independent coffee chain Bear, said that the energy supplier refused to renew his energy contract because his business was in the hotel industry ravaged by the pandemic. “Stupid electricity bills” were paid.

Lucinda O’Reilly, director of the International Trade Consulting Company, told CNBC: “The rate at which energy prices are rising will have a catastrophic impact on British manufacturers, who have paid much higher prices than competitors in Europe and other countries. The world.”

“The squeeze on small businesses has been frightening, many of us stopped investing, and most suppliers send out price increase emails every week,” added Adam Bamford, CEO of Colleague Box. “This is probably the last straw that will crush many of us.”

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