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UK natural gas prices surged to the highest since 2013 as an explosion at one of Europe’s key import hubs sent traders scrambling to secure supplies with a key North Sea pipeline already shut off and a cold snap gripping the country.
The blast at Austria’s Baumgarten import hub left at least one person missing and 18 injured and caused gas flows from Russia into the continent to plunge, stoking fears of a supply crunch as Europe shivers under sub-zero temperatures.
The same-day UK gas price rose as much as 40 per cent to 95 pence per therm in early London trading while the price for delivery in January rose by roughly a fifth to 75 pence, the highest levels seen in four years.
Prices in the Netherlands and Italy also rose with Rome declaring a “state of emergency” regarding energy supplies.
The price jump is likely to raise questions in the UK about the security of ageing energy infrastructure as the long decline in North Sea output and the shutdown of storage facilities makes the country more dependent on imports.
Motoring lobby organisation the RAC warned on Tuesday that petrol and diesel prices could rise by 3p a litre before Christmas.
Inflation is also a growing political issue in the UK after increasing at the fastest pace in five years in November, climbing 3.1 per cent largely because of rising energy costs.
UK gas prices were already climbing this week because of the shutdown on Monday of the Forties Pipeline System, which delivers as much as 40 per cent of oil and gas from the UK North Sea.
Snow and icy temperatures are also boosting gas demand with sections of the River Clyde in Glasgow freezing over for the first time since 2010.
Ineos, the operator of the Forties pipeline, has warned it could be closed for weeks as it works to repair a fractured section of pipeline in Aberdeenshire, south of where it comes ashore, with up to 85 fields that feed into the line forced to shut in output until it is fixed.
The UK government said on Monday there was no risk to “security of supply” in the country with ample import capacity. Analysts said the volume of liquefied natural gas, the super-cooled version of the fuel that is shipped on tankers, may increase to the UK in the coming weeks.
Brent crude, the international oil benchmark underpinned by supplies from the North Sea, jumped above $65 a barrel overnight because of the shutdown, its highest in more than two years, a move that is likely to soon be felt by motorists at the pump.
PVM energy brokerage in London said the outage was “one of the most significant unplanned crude oil shortages we have seen this year”, helping to boost Brent to more than $7 a barrel above US benchmark West Texas Intermediate.
Higher oil and gas costs are likely to be felt by businesses already battling uncertainty created by the UK’s move to exit the EU with the annual rate of growth in the cost of materials and fuels — known as producer prices — jumping to 7.3 per cent in November from less than 5 per cent the month before.
“The prices of raw materials and goods leaving factories continued to increase as oil and petrol prices continued to rise,” Mike Prestwood, ONS head of inflation, said on Tuesday.
It was not clear how long the gas explosion in Austria may affect supplies into the continent.
Gas Connect Austria, which is majority owned by OMV, said the Baumgarten plant had been shut down and was out of operation. It reported one person missing and 18 injured. “We can make no exact statements on the cause or on the extent of the incident”.
It promised further updates as soon as possible. Police in the province of Lower Austria cited a “technical cause” for the explosion and said an official investigation had started.
Gazprom, Russia’s state-owned gas export monopoly, which supplies about 40 per cent of Europe’s gas, said it was working to redirect supplies from the Baumgarten hub.
Additional reporting by Ralph Atkins in Zurich and Henry Foy in Moscow