EconomyFinancePrice Analysis

Gas Rates Surge In Europe As Bank Of England Announces Highest Interest Rates In Over A Decade

The world economies continue to increase interest rates to fight increasing inflation. Also, the Bank of England raised interest rates on Thursday to fight inflation.  An increased energy price was recorded early Thursday in Europe.

Increase In Gas Rate

The gas prices in England and Netherlands keep surging on Thursday, and the governments are looking for ways to reduce demand as winter approaches. 

Reports show that the Dutch front-month contract is now €193 for a megawatt hour. The European benchmark recorded an increase of €11 in the early hours of Thursday. 

Similarly, there was an increase of 12 pence and 10 pence for the British day-ahead and the within-day contracts, respectively. The British day-ahead is at 249 pence a therm while the within-day contract is at 250 pence a therm.

A gas dealer in one of the European countries opines that the European Union will make sure gas rates drops since they have removed the sanctions placed on Russian coal. He further explained that although the escalation is a bullish indicator, the energy market remains bearish.

Likewise, Analysis from Refinitiv explained that the European gas market is unstable and that the price of gas will soon fall due to many efforts put in place by the leaders to reduce the high energy rates will eventually pay off.

Meanwhile, in the northwestern part of Europe, there has been an inflow of liquefied natural gas, according to an analyst from Engie’s EnergyScan.

He further explained that if the high liquefied natural gas continues, coupled with the reduction in energy consumption, the high gas price will fall when the reservoirs across the European countries get filled up. He said some reservoirs would be full next month.

Increase In Interest Rate

In the quest to increase the nation’s gas supply, the British government has removed the ban on fracking for shale gas. This ban restriction has been on since 2019. The government explained that they prioritize the additional supply of energy.

Also, the Bank of England increased the interest rate on Thursday. That makes it the seventh consecutive time. However, the 0.5% increase, which is to fight inflation, might not be effective. Inflation might hit more than 10% because of the adverse effect of increased gas rates. The inflation rate will then start falling months later.

The increase in bank rate is the second consecutive 0.5% increase. It also shows the authorities are trying hard to fight the surging inflation rates. The new 2.25% interest rate is the highest in fourteen years.

Energy companies that are facing a liquidity crisis due to the problem in their industry are expecting a proposal from the European Securities and Markets Authority (ESMA) to ease their collateral burden.

The energy demand might surge next week as the forecast shows it could get colder. However, this could increase the energy price again as people will need gas for warmth.

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