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Gas traders start giving it away | Gas traders start giving it away |
(about 2 hours later) | |
A glut of natural gas supplies in Britain has seen prices collapse and left traders having to pay for it to be taken off their hands. | A glut of natural gas supplies in Britain has seen prices collapse and left traders having to pay for it to be taken off their hands. |
Wholesale gas prices for immediate delivery turned negative on Tuesday as supplies surged in from the new Langeled pipeline from Norway. | |
Britain's gas storage capacity is 96% full so firms need to offload supplies. | Britain's gas storage capacity is 96% full so firms need to offload supplies. |
As domestic gas bills are based on longer-term contracts, consumers will have to wait for big reductions. | |
After trading at an average of 26p a therm through September, the spot price for gas delivered immediately fell to -5p during the course of the day, meaning traders are paying to get rid of it. | |
Mild weather - and a predicted milder winter - is also reducing demand. | |
You won't see the effect from this on lower domestic bills until after the winter Chris Bowden, Utilyx chief executive | |
"There is simply too much gas flowing into the UK," said Chris Bowden, chief executive of energy services company Utilyx. | |
Lazy market | |
Major UK energy companies may be unable to take advantage of the free gas because of the lack of available storage and the fact that they have "hedged" supplies - protecting themselves against the risk of high gas prices over the winter by buying it in advance at a lower price. | |
"You won't see the effect from this on lower domestic bills until after the winter," Mr Bowden said. | |
But that will not be soon enough, according to consumer watchdog Energywatch. | |
"Consumers have paid a huge price over the last three years - we have seen 80% price rises," said chief executive Allan Asher. | |
"It is time for more competition in this lazy old market - we need some Tesco gas and a price war in the gas market to match the price war in the petrol market." | |
Dwindling reserves | Dwindling reserves |
Laying the Langeled pipeline | Laying the Langeled pipeline |
Prices are expected to rise again this Autumn as colder weather increases demand and the gas flowing through the Langeled pipeline returns to normal levels. | |
The £5.5bn, 746-mile long (1,200km) pipeline started pumping gas from Norway into the UK's supply network last Sunday, and is currently working at full capacity for testing purposes. | |
It has an annual capacity of 20 billion cubic metres of gas and is expected to supply a fifth of the UK's peak winter fuel demand over the next 40 years. | It has an annual capacity of 20 billion cubic metres of gas and is expected to supply a fifth of the UK's peak winter fuel demand over the next 40 years. |
It is hoped the pipeline will ease concerns over dwindling supplies which have sent gas prices in the UK soaring over the past two years. | It is hoped the pipeline will ease concerns over dwindling supplies which have sent gas prices in the UK soaring over the past two years. |
The UK's own reserves of natural gas are dwindling so it is necessary to import gas from abroad. | The UK's own reserves of natural gas are dwindling so it is necessary to import gas from abroad. |
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