Gas prices in the UK and continental Europe tumbled by as much as a fifth on Friday on further signs Russia will increase exports to the region after restricting supplies for months.
Russia’s state-run gas exporter Gazprom said on Friday it had hit its target for filling domestic storage two days after President Vladimir Putin ordered the company to start filling its European storage facilities. The intervention comes after allegations from some analysts that Moscow has stoked an energy crisis by holding back supplies.
The UK benchmark day-ahead contract dropped almost 20 percent to 21.39 a therm after trading at record levels above 22 a therm for most of October.
While prices are still roughly three times the level of the start of the year, the sell-off will provide much-needed relief to energy-intensive industries and boost hopes that the drag from gas prices on economies will not be as bad as first feared. Concerns about inflation have also been heightened by the gas price surge, increasing pressure on central banks to consider raising interest rates.
While traders cautioned that prices could quickly head higher again if additional Russian supplies do not materialize in November, they said the signals from Moscow had been enough to stall the months-long rally.
UK gas contracts for delivery in December fell 15 percent to 21.67 per therm while the European benchmark fell almost 12 percent to €65-70 per megawatt-hour, having traded above €100 as recently as two weeks ago.
“This is all about Russia and the hope that, finally, supplies are going to rise after the games we’ve seen from Moscow this year,” said one energy trading executive.
Gazprom said on Friday it would have completed all domestic storage fills by November 8, the same day Putin said should be the deadline for starting to send additional supplies into Gazprom’s own facilities in Germany and Austria, which have been run down to unusually low levels ahead of the winter.