Wholesale gas prices in the UK more than doubled on Wednesday to their highest level in at least 10 years, as freezing temperatures across Britain drove a spike in demand and raised fears of a supply shortage.
Within-day prices rose 108% to 160p per therm, after hitting am earlier peak of 190p per therm. Day ahead prices were up 6p at 95p.
It comes as the severe cold snap continues and is forecast to worsen in some parts of the country.
Experts said that while National Grid data suggested the market had a theoretical oversupply, physical shipments remained low. Britain’s bigger energy companies typically hedge supplies many months in advance, so short-term price spikes should not automatically trigger higher prices for customers. But smaller suppliers, which account for about 20% of the market, are usually less hedged and can pass on price rises sooner.
Bulb, which has about 300,000 customers, said on Tuesday that it would raise bills by 2.8% from 28 April.
Fears over supply were exacerbated by outages at gas terminals in St Fergus, Scotland, and at Morecambe, which amounted to about 13m cubic metres of capacity.
“These events may ease during the day but could also add to already acute demand for gas,” said gas analysts at Thomson Reuters. A further outage at a Norwegian gas processing plant also contributed to the rise in UK wholesale prices.
National Grid data on Wednesday showed demand for gas was 28% above the seasonal norm. A National Grid spokesperson said: “Due to the cold weather some supplies have tripped but we’re also seeing some come back. We are in communication with terminal operators and closely monitoring the situation. Market prices are high, reflecting the supply and demand position.”
Britain’s ability to respond to short-term demand shocks has been hampered by the closure last year of Centrica’s Rough gas storage site in the North Sea off the Yorkshire coast, the country’s largest site. At its operational peak Rough could store about 10% of Britain’s gas demand.