Wholesale gas prices have tumbled amid signs that European leaders’ plans to avert a winter energy crisis are taking shape.
The price of gas for delivery on Friday dropped 21% from last night’s price of 405p per therm to 320p, as the European Commission confirmed it is working on “emergency measures” and the German government said it is “prepared” for the winter.
The British wholesale gas price for delivery next week fell 9% to 350p while the month-ahead price fell 6% to 431p on Thursday.
Earlier this week the day-ahead price fell from 447p a therm after the European Commission said it was working “flat out” on an emergency package as well as examining structural reform of the electricity market.
The European Commission said on Thursday it was looking into options to cap energy prices and cut electricity demand as part of its upcoming proposals to tackle soaring energy costs.
Mechthild Wörsdörfer, deputy director general of the commission’s energy department, told a meeting of European parliament’s energy committee: “There is work on emergency measures on electricity prices. There might be also something on demand reduction for electricity.”
The European Commission chief, Ursula von der Leyen, will outline the commission’s ideas on capping energy prices in a speech on 14 September.
European countries have rushed to fill up gas storage facilities after Russia cut supplies into Europe.
Germany is among the nations most exposed to potential shortages of gas and there are fears that – if the Kremlin switched off supplies altogether – its economy could tumble into recession.
However the German economy and climate minister, Robert Habeck, said the necessary preparations for this winter had begun. “That’s why we have answers and progress that allows us to be prepared for the winter,” he said.
Earlier this week the German chancellor, Olaf Scholz, said his government had “taken very far-reaching decisions very quickly”.
City analysts at Bernstein said: “German leaders see the country well-equipped to get through the coming winter in the ongoing energy crisis.”
However, Habeck cautioned that work to secure gas supplies was not yet complete.
Gas market traders are on tenterhooks to see whether Russia state-owned gas giant Gazprom returns the Nord Stream 1 pipeline under the Baltic Sea back to service after a three-day maintenance shut down, which began on Wednesday.
European gas storage facilities are now almost 80% full on average, nearing an EU target for countries to hit 80% full by 1 November.
Researchers at Wood Mackenzie predicted high natural gas prices will drive down European demand to 7% below the five-year average in the months through to March, leaving a “best-case scenario” of storage levels at 31% at winter’s end.
Massimo Di Odoardo, vice-president for gas and liquified natural gas (LNG) research for Wood Mackenzie, said: “Strong LNG and non-Russian pipeline imports have helped get Europe gas storage levels to 80% at the end of August, beating expectations.
“We expect this to rise to 86% by the beginning of October. If Russian flows from Nord Stream resume at current levels following the three-day maintenance in September, Europe could be in a position to get through this and next winter without demand curtailments.”
Separately on Thursday, the Office for National Statistics said that the average price of gas in the UK increase by 30% in the week to 28 August, the highest level so far in 2022.