European wholesale gas prices fall to fresh record lows

European gas markets have fallen to fresh record lows as the impact of the coronavirus pandemic continues to erode the demand for fossil fuels.

In the UK, the wholesale market price for gas delivered next month fell to 9.25 pence per therm, its lowest in 21 years, raising hopes that winter heating bills may be lower this year.

Gas markets in Asia, Europe and the US have all slumped after being left awash with a glut of gas owing to a collapse in demand for the fossil fuel.

In the Netherlands, considered the most important gas market in mainland Europe, prices fell to €3.93 (£3.52) per megawatt hour on Thursday, less than a third of the price recorded this time last year.

The market price for gas was in decline before the Covid-19 pandemic, which could cut demand for gas by 5% this year, according to forecasts from the International Energy Agency.

However, the price of oil climbed above $36 (£29) a barrel for the first time since March on Thursday. Brent crude is now more than double the price it was last month when it fell to 21-year lows.

Gas market prices have continued to slide despite cancelled gas exports from the US where shale projects are beginning to shut down, according to analysts at the petrochemical market information provider ICIS.

In March, the US loaded 72 cargoes of gas for export on giant liquified natural gas (LNG) tankers, and loaded another 61 in April. From July it will hold back between 30 and 40 cargoes, which could mean cutting around 2.6m tonnes of LNG from the global market, the equivalent of about 8% of the world’s monthly gas supply.

Ed Cox, the head of LNG at ICIS, said the collapse of European prices showed that the US decision to cut gas exports was “not sufficient to balance the market”, adding that “more supply needs to be taken offline”.

Europe’s gas storage facilities, which steadily fill up over the summer in preparation for the winter months, are already more than half-full after record storage injections through April to take advance of the cheap gas.

Energy suppliers may be able to pass on the record-low market prices to their customers this winter. But some firms are likely to face severe financial pressure owing to unpaid customer bills which may limit their ability to pass on savings.

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