Business

Wholesale gas prices 'soared by 12 per cent in last month'

Vayu.Picture by Shane O'Neill / Copyright Fennell Photography 2014.

WHOLESALE gas prices have spiralled by around 12 per cent on average so far in November compared to last month - and up by 34 per cent on the same month last year - according to the latest wholesale energy market report from Vayu Energy.

Increased demand from mainland Europe and limited liquefied natural gas (LNG) supply during October and November have been blamed for the higher prices.

The average day-ahead price for gas, the contract for gas delivery tomorrow, is 48 pence per therm for November so far, which compares with an average price of 36.01 per therm a year ago.

Joanne Daley, senior energy analyst at Vayu Energy said a lack of liquified natural gas (LNG) coming into the market was keeping prices higher.

“After just one LNG cargo arrived into the UK during October, three cargoes are scheduled for November delivery which should bolster LNG send-out.

"Although these numbers are an improvement on that seen in October, LNG deliveries will have to increase further in order to put significant downward pressure on prices.

"Looking further ahead into 2017, traders have noted there is a lot of uncertainty around available supply at the start of next year.

"If temperatures remain around seasonal norms, the outlook is relatively stable.

"However, higher than expected demand, coupled with continuing low LNG deliveries could hold up prices during Q1."

She said contracts also remain sensitive to moves of Brent oil.

"As such, the results of the November 30 meeting of OPEC and non-OPEC members will be important for contracts for delivery next year and beyond.

"If an agreement to reduce oil output is reached, oil prices are likely to firm. This in turn could push up gas prices on the far curve.

"However, if a firm decision to reduce output is not made it is possible we could see Brent weaken further as plenty of new oil supply appears to be on its way to the market."

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