Market sources told Utility Week that the price of winter gas on the UK wholesale market rose from Thursday’s close of 58.80 pence per therm to 59.20 p/th over Friday’s trading session, but prices reversed the trend to tumble down below 58 p/th following news that an agreement in principle was reached between the two countries.
The contract price of winter 2014/15 gas was last heard trading at around 57.80 p/th, a trader told Utility Week shortly after 16.00 BST, almost 2.5 per cent below its intraday high.
Over recent months market players factored in a risk premium to gas prices due to concern that supply from Russia, Europe’s largest gas supplier, might be disrupted due to tensions with its neighbour and key gas-transit state Ukraine.
Uncertainty over the volatile situation in the region supported gas prices across Europe despite an otherwise bearish market for gas due to low temperature-led demand last winter and healthy gas storage levels as a result.
A UK power trader told Utility Week that gas prices are now falling faster than wholesale power prices which could mean more favorable market conditions for gas-fired power generators.
UK power prices are expected to remain supported by the looming capacity crunch expected this winter following a string of unplanned outages.