European natural gas prices surged to unprecedented highs on Tuesday, pulling down the UK bond market in particular as a sign that investors are expecting broader economic damage.
Europe’s gas supply contracts in November increased by 23% from just € 18 six months ago to € 117.50 per megawatt hour due to the outlook for winter supply shortages. UK prices have also skyrocketed, surpassing £ 3 for the first time and tripled in the last two months.
The latest price increase is with British gas Europe Currently, it trades at more than $ 200 in oil equivalent, or nearly three times the price of crude oil, and the effects of inflation could spill over into economies that rely on gas for heating and power generation. Traders are currently setting prices close to 6% at the peak of the UK consumer price index in April next year.
Soaring gas prices on Tuesday added fuel Recent fall in bond pricesEspecially in the UK, where concerns about rising prices are most acute. UK 10-year Treasury yields surged to 1.09%, the highest since May 2019.
Yields on 10-year Treasuries approached their three-month highs last week as eurozone and US government debt weakened and investors became more concerned about inflation.
Micridel, portfolio manager at Allianz Global Investors, said: “This rise is so dramatic that it encourages these concerns about stagflation.”
Long-term inflation expectations It shifted higher, extending the sale of gold that began last month when the Bank of England showed that it could raise interest rates sooner this year.
But investors are wondering if central banks can curb inflation caused by supply shortages in the energy market, which is spreading from Europe to the wider world. Asia’s largest economy is also increasingly feeling record price hits. Including coal market, Both China and India are experiencing supply shortages.
The tightness of the energy market is partly due to economic activity from the depths of the pandemic and the rapid recovery of energy demand. However, gas demand is also increasing in Asia, and the government is trying to reduce its reliance on highly polluted coal. Domestic production in Europe is also declining.
Russia, the largest supplier of natural gas to Europe, also limits pipeline exports to long-term contracts only, but traders want to sell in more spot markets to fill their storage facilities. ..
Russian President Vladimir Putin described the situation in Europe as one of the “hysteria and turmoil” on Tuesday, accusing the shortage of supply due to lack of investment in fossil fuels as the economy tries to pivot towards renewable energy. bottom.
Ukraine and other Eastern European countries have accused the Kremlin of trying to “weaponize” its natural gas supply to ensure swift approval for its launch. Nord Stream 2 pipeline As part of a backlash against the promotion of renewable energy.
Nord Stream 2 carried Russian natural gas to Germany via the Baltic Sea, bypassed Ukraine, and was subject to US sanctions until Angela Merkel and President Joe Biden agreed earlier this year.
Soaring energy prices are also putting pressure on European governments and policy makers. European Commission President Ursula von der Leyen said on Tuesday that Brussels would consider establishing a common strategic storage facility for gas, praising Norway for taking steps to increase gas production. He warned that he was heavily dependent on Russia.
“I am very grateful that Norway is stepping up, but this does not seem to be the case for Russia,” said Fonde Araien.
Brussels Pressured to act Faced with record natural gas prices, the Spanish, Italian, French and Greek governments were forced to agree on subsidies to protect households from higher costs.
Record wholesale prices Collapse of 10 retail energy providers From the beginning of August in the UK, millions of customers had to be transferred to other companies.
The cost of supplying gas and electricity to the average UK household for a year has skyrocketed to over £ 1,800, well above the £ 1,277 price limit.
Gas crunch hits government bond market as energy prices soar
Source link Gas crunch hits government bond market as energy prices soar
The post Gas crunch hits government bond market as energy prices soar appeared first on Eminetra.