UK Edition
UK gas prices surge to highest since June on fears of pipeline sabotage
Prices jump to a four-month high on supply fears
Gas prices have surged to their highest level since June after Israel shut a key production field and Finland launched an investigation into potential sabotage of a key pipeline.
Wholesale UK gas prices jumped by as much as 14pc on Tuesday to more than 125p per therm, having traded as low as 88p on Friday.
This followed a 15pc gain on Monday. Prices are now at a four-month high and on track to close at the highest level since April.
Markets were reacting to fears about gas supplies on two fronts, amid worries over both a potential attack on a North Sea pipeline and warfare in Israel.
Officials in Finland and Estonia are investigating a leak on the Balticconnector gas pipeline between the two countries, amid fears of sabotage.
Finnish President Sauli Niinisto said the damage appeared to be “the result of outside activity” and NATO is speaking to the country about the breach.
Last year, Russia attacked the Nord Stream pipelines between Russia and Germany.
Callum Macpherson, head of commodities at Investec, said: “It would be a massive worry if it means all of Europe’s gas infrastructure is at risk. The North Sea is crisscrossed by pipelines delivering gas from fields and interconnectors between markets.”
At the same time, escalating conflict in Israel following the terrorist attack by Hamas on Saturday has raised fears over the future of gas supply from the Middle East.
On Monday, Israel told Chevron to suspend production at its Tamar gas field, which is within range of Hamas rockets in Gaza. The Tamar field produces around 1.5pc of global liquified natural gas, according to Goldman Sachs.
There are also growing worries about the nearby Suez Canal, which is a major shipping route for LNG to Europe, Mr Hansen said.
Gas remains far cheaper than it was last year, with wholesale prices peaking above 600p a therm last September. However, cold weather in the coming months could trigger further jumps in costs.
Mr Macpherson said: “If we have a hard winter, then things could start to look like the news we had last year. That’s a really big unknown for the gas market.”