Gas prices hit highest level since December but oil costs plunge

Wholesale costs for natural gas have hit their highest levels across Europe since December last year threatening a future spike in energy bills, but drivers could soon get further fuel relief through an oil price plunge.

Brent crude fell by more than 3% on Monday - to just below $78 a barrel at one stage - on market speculation that major oil producing countries in the Opec+ group, which includes Russia and Saudi Arabia, were set to ramp up exports later in the year.

It left the international benchmark trading at levels last seen in February.

The downwards shift for oil took place as natural gas costs went the other way on news that key Norwegian export operations had been shut down due to a cracked pipe.

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The damage, discovered aboard the Sleipner Riser platform, prompted wider energy infrastructure to be halted including the Nyhamna processing plant which exports gas to the UK, pipeline operator Gassco said.

Alfred Hansen, the company's head of pipeline system operations, told the Reuters news agency: "This has big consequences from a supply perspective."

He added that while there were options for bypassing Sleipner, they were time-consuming and not without risk.

There was no estimate on how long the fracture could take to repair.

The shutdowns affect deliveries to the Easington terminal off the Humber estuary - one of six major import and storage facilities in the UK.

LSEG data showed a 10% leap in the UK contract for July delivery to 90p per therm in the wake of the unplanned shutdown announcement.

That price was last seen at the end of December last year.

It was a similar picture for the main European front-month contract, which also hit a 2024 high as deliveries to countries including Germany also fell.

Norway became Europe's biggest gas supplier in 2022 as Russia faced an international backlash for its invasion of Ukraine.

Prices have been volatile in recent weeks due to maintenance schedules in Norway coinciding with attacks on Russian infrastructure.

The immediate leap in prices could have been worse had the outage struck in winter, the period of highest demand.

Prolonged damage to imports, however, would have a bearing on energy costs for households and businesses heading in to winter 2024/25.

It would not be felt until September at least.

That is because the UK regulator Ofgem announced last month that average annual bills under the energy price cap would fall by more than £100 from July to September.

While that level is locked in, limited increases are already currently expected for the two, colder, three-month periods that will follow.

A Gassco spokesperson said: "We are working... with a plan for repairs and with a plan for compensatory measures to deliver the highest possible volume to Europe."