Business

Glut of natural gas could sink wholesale prices

Niall Martindale, Firmus Energy
Niall Martindale, Firmus Energy Niall Martindale, Firmus Energy

WHOLESALE gas prices could sink to levels usually only found in the United States due to a glut in supply.

Forecasters Eclipse Energy said a glut in supply of natural gas could see a dramatic fall in the wholesale price putting the UK in line with America where prices are kept low due to a boom in shale gas.

It means the overall cost of wholesale energy could be kept low over the coming months despite edging upwards in October from an all-time low.

However the latest Firmus Energy Index remained a third below its level in the same months last year.

Coal prices meanwhile remained "largely in the doldrums" the report found. The cost of a metric tonne did rise by just over a dollar last month but it was almost totally neutralised by the strengthening pound, Firmus said.

At one point there was a concern over an interruption to supplies from Russia but "that worry evaporated in light of a boost in imports from the US".

The cost of oil too was little changed in October. Brent crude closed the month a dollar a barrel higher but when translated into sterling, prices were broadly the same month on month.

And subdued oil prices could remain the story until the end of the decade. Demand for oil is predicted by the International Energy Agency to rise by just one per cent a year which Firmus said was "simply not enough to mop up a glut of oil".

The IEA expects crude to reach $80 a barrel by 2020 but said it’s possible it could take much longer to attain that level. The organisation concedes oil could struggle to rise much above $50 before the end of the decade.

Niall Martindale, director of regulation and pricing for firmus energy said: “The upward move last month was almost entirely due to a surge in the cost of power. Electricity prices were pushed higher by an increase in demand lending towards more typical winter levels but calmer weather also played a role. As wind turbines idled, the gap had to be filled by power stations which face inescapable fuel costs.”