British wholesale gas prices have reached their highest level in more than eight months, raising concerns for potential increases in energy bills. According to data from the London Stock Exchange Group, prices surpassed 100p per therm on Monday – a level not seen since December 2023.
The surge in prices is being attributed to escalating tensions in the ongoing war between Ukraine and Russia. Last week, Kyiv launched an invasion of Russia’s Kursk region, leading to fears of further conflict and disruption to gas supplies. Ukrainian media has also broadcasted unverified video footage allegedly showing the country’s soldiers in control of a gas measuring facility in the key town of Sudzha, which is a crucial site for Russian gas exports to Europe via Ukraine.
In addition to the tensions between Ukraine and Russia, supply issues have also contributed to the rise in gas prices. An unplanned outage at the Bacton Seal terminal on the Norfolk coast and the upcoming closure of the St Fergus Mobil gas terminal in Aberdeenshire for more than five weeks have added to concerns over gas supply.
The increase in gas prices is not the only concern in the energy market. Oil prices have also risen as tensions continue to escalate in the Middle East. Benchmark Brent crude rose to over $80 (£63) a barrel on Monday, the highest since July 31. Speculation is mounting that Iran could retaliate against Israel following the killing of a senior Hamas member in Tehran last month, and the US has ordered the deployment of a guided missile submarine to the oil-producing region. The recent Israeli airstrike on a school-turned-shelter in Gaza City, which resulted in the deaths of 80 people, has further heightened tensions.
The rise in oil prices also follows a dip last week due to fears over a potential recession in the US. However, new data showing a drop in US jobless claims helped ease these concerns towards the end of the week.
Market analyst Tony Sycamore from trading platform IG UK stated that the support for oil prices is also coming from last week’s better-than-expected US data. He also noted that there is significant anxiety over when Iran may seek revenge for the assassination of key Hamas and Hezbollah leaders by Israel. Warren Patterson from Dutch financial institution ING added that the market is still waiting for Iran’s response.
Despite fears over gas supplies, Russia’s Gazprom has reassured that it will send 39.6 million cubic metres (mcm) of gas to Europe on Monday, slightly more than the 39.3 mcm sent on Sunday. Analyst Christoph Halser from Rystad Energy believes that the impact of any escalation in the war may be limited, as Europe has reduced its dependence on Russian gas in recent years.
