The UK and Europe have experienced a period of mild weather, which has caused wholesale gas prices to drop. This is a relief from the high prices that have resulted in skyrocketing energy costs.
Prices for delivery in Europe decreased by 4.3% to €73.7 per megawatt hour in February, while prices in the UK decreased by 3.8% to 179p per therm.
The UK and the rest of Europe have experienced a decrease in heating demand as a result of recent milder weather, and the outlook for the next two weeks is for continued mild weather.
Optimism regarding gas supplies has grown as a result of the situation. Gas supplies have been tightened since Russia cut back on gas exports to Europe following its invasion of Ukraine. Prices dropped last week to lows not seen since the beginning of the war in February 2022.
Due to concerns about shortages this winter, European countries rushed to fill up gas storage facilities. They have made good progress, which has given traders hope and caused prices to decrease. Additionally, traders bet on the possibility of a global recession reducing energy demand this year.
However, questions remain regarding how Europe will replace its reliance on Russian gas imports in the upcoming year, which means prices are likely to stay above average in comparison to earlier periods.
Alexander Novak, the deputy prime minister of Russia, made a statement over the Christmas holiday indicating that Moscow was prepared to restart gas shipments to Europe via the Yamal-Europe pipeline, which crosses Poland and was cut off last year.
Separately, Germany and Poland kept their word and stopped pipeline imports of Russian oil on Sunday.
The cost of the UK government’s efforts to lower energy costs could be significantly reduced if this week’s decline in gas prices continues. In an effort to keep average household bills under £2,500, the state is paying the difference between wholesale prices and the energy price cap for suppliers.
The government predicted in November that its plan to reduce domestic bills would cost £25 billion this fiscal year and an additional £13 billion in 2023–2024.
(Adapted from TheGuardian.com)