Cold weather propels gas prices to six-year high

Plunging temperatures and a supply squeeze sent UK wholesale gas prices soaring to their highest level in nearly six years yesterday as Europe shivered in the grip of the big freeze.

As a host of European cities endured subzero conditions, Italian ministers raised the alarm at a "critical" shortage of gas, while the UK also became France's biggest energy supplier for the first time. Germany – usually the biggest exporter of electricity to France – held back generating capacity as the temperature dropped to minus 12C in Berlin. Russia's move to cut gas exports by 10 per cent last week added to the supply crunch, as the mercury sank to minus 10C in Moscow.

Analysts at gas-market intelligence company Icis Heren said the price of wholesale gas for next-day delivery hit 93p a therm in frenetic trading, the highest since March 2006. Wholesale gas prices are nearly 30 per cent ahead of Friday's closing price and almost double the 51p seen in mid-January before the cold spell hit.

The price spike is all the more significant because the UK has more sources of supply than six years ago, such as major liquefied natural-gas import terminals at Milford Haven and the Isle of Grain. But the freeze has also prevented many Russian ships leaving ports.

Rough, the UK's biggest offshore gas-storage facility, has been pumping the maximum 45 million cubic metres of gas into the UK's gas network for the past five days. The Centrica-owned storage centre, 18 miles off the Yorkshire coast, is two-thirds full, containing 2.3 billion cubic metres of natural gas.

Icis Heren analyst Ed Cox said of the price spike: "There is an element of panic out there at the moment. People are expecting the price to be 20p lower next week; if this cold spell remains intensely cold for the next week or so [the high prices] could continue. It really depends on the weather – this has taken the market by surprise. The cold weather has hit everywhere from Spain all the way over to Russia in the east."