The coming convergences on natural gas prices . . .

Today’s announcement by Centrica that they plan to raise average home gas bills by £50 for it’s 15.9 million customers doesn’t make for popular news headlines , especially with the Mirror. It certainly used to be that our natural gas prices were very seasonally affected – going up in the winter and down in the summer. But if you look at the latest 12 month chart – apart from a brief spike – spot wholesale NBP prices have actually been very stable at around 60 pence a therm and traders must be finding it pretty boring. Now look over the Atlantic and see the 50% drop to a price around 4 times lower than our own.

In the years to come, there’s huge scope for two major convergences on natural gas prices;

1) Between the wholesale and retail price – I feel sure the wholesale market is going to be opened up to smaller players and cooperatives who will sell back at much lower margins

2) Between Henry Hub and the NBP – when LNG cargoes start arriving from North America

Until then though, I reckon we could be in for another year, much like the last one.  And Centrica and other utilities will struggle to make a case for raising bills while successfully pursuing even bigger subsidies for their nuclear and renewables programmes.


Leave a Reply