A spell of mild weather in the UK and Europe has pushed wholesale gas prices down as a reprieve from high prices that have pushed up energy bills.
European prices for February delivery fell 4.3% to €73.7 per megawatt hour, while UK prices fell 3.8% to 179p. per term
Recent milder weather has reduced heating demand in the UK and the rest of Europe and conditions are expected to be mild over the next two weeks.
The situation has boosted optimism about gas supplies, which have been stretched since Russia cut gas exports to Europe following its invasion of Ukraine. Last week prices fell to levels not seen before the start of the war in February 2022.
European nations rushed to fill gas storage facilities amid fears of shortages this winter. They have made good progress, creating optimism among traders and leading to a reduction in prices. Traders also bet that a possible global recession would reduce energy demand this year.
However, concerns remain about how Europe will replace Russian gas imports next year, meaning prices are likely to remain high compared to historical averages.
Over the Christmas period, Russian Deputy Prime Minister Alexander Novak indicated that Moscow was ready to resume gas supplies to Europe via the Yamal-Europe pipeline, which runs through Poland and was shut down last year.
Separately, Germany and Poland on Sunday made good on a promise to stop Russian oil imports via pipeline.
If this week’s fall in gas prices deepens, it could significantly reduce the cost of the UK government’s efforts to reduce energy bills. The state is bridging the gap between wholesale prices and the energy price cap for suppliers, in an effort to cap typical household bills at around £2,500.
The government said in November it expected its plan to cut national bills to cost £25bn this financial year and a further £13bn in 2023-24.
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Businesses and other energy consumers such as schools and charities are awaiting an update from the government on plans to extend a similar non-domestic initiative beyond March.
Live data from electricity system operator National Grid on Tuesday showed that more than half of the power generated in Britain comes from wind, with gas accounting for 21% and nuclear 17%.
In the run-up to Christmas, gas-fired power stations accounted for up to 60% of the energy mix as cold weather and low wind speeds put a strain on Britain’s power systems and led to record electricity prices energy