LONDON (Reuters) - Spot gas prices rose to their highest levels since early 2006 on Monday morning as extreme cold continued to sweep across Britain and most parts of Europe.
Bitterly cold weather throughout Europe has left large parts of the continent struggling to cover gas and power demand, while forecasters warn that low temperatures would continue into next week.
Gas prices for within-day delivery were trading at 79 pence per therm 8:15 a.m., and prices for delivery on Tuesday were at 78.50, up around 4 pence since Friday afternoon.
The increases mean that day-ahead gas prices were at levels not seen since early 2006, when prices spiked after Russia cut off all gas supplies to Ukraine and an explosion rocked the UK’s Rough storage gas platform. Prices have shot up some 50 percent since the beginning of the cold spell.
It also surpasses the spike in January 2009, when Russia cut gas supplies to Europe through Ukraine for two weeks.
Traders said the main reason for the price spike was concern that a glitch in Norwegian flows could cause serious disruptions in the UK.
Unlike flows from Russia, which last week had to reduce exports to Europe in order to cover its own rocketing domestic gas demand, Norwegian gas flows have held up since the beginning of the cold snap.
UK spot gas graph: link.reuters.com/sus46s
The ongoing cold weather means the UK gas system was short of supply on Monday, despite healthy Norwegian flows.
Daily demand was forecast at 396.6 million cubic metres (mcm), 68 mcm above the seasonal norm, according to National Grid data.
With expected supplies of 383.2 mcm, the system was 13.4 mcm short, implying the need for more withdrawals from gas storage.
UK storage sites were 65.33 percent full on Sunday, down from around 75 percent at the beginning of the year but still some 5 percent above the European average, according to Gas Infrastructure Europe.
Send-outs from British gas storage sites were just under 110 mcm on Monday, according to Point Carbon, down from a peak of 130 mcm last week but up from around 60 mcm at the end of January.
At 59.75 pounds per megawatt-hour (MWh), UK spot power prices were also high, reaching levels last seen in winter 2010.
The UK’s Met Office kept its Level 3 Cold Weather Alarm in place, saying, “There is a 100 percent probability of severe cold weather and icy conditions between 1000 (GMT) on Sunday and 1000 on Thursday in parts of England.”
Meteoalarm, a European weather warning system, kept weather warnings in place for large parts of Europe. (www.meteoalarm.info/)
Reporting by Henning Gloystein; Editing by Jane Baird