The EUR GBP exchange rate was higher on Monday by 0.10% as the pair looks to avoid a retest of the yearly lows. The UK economy will see employment figures released today and that could slow the path of rate hike bets if the number comes in lower. Energy analysts Wood MacKenzie have also warned of the risk of higher gas prices later in the year.
The EUR to GBP rate is trading above 0.8500 as the pair seeks to avoid a retest of the 0.8450 lows.
Sky is the limit for gas prices say energy analysts
European natural gas stocks could be completely used up over the next few months, leaving the continent dependent on Russian pipeline imports if the winter turns out colder in Europe and Asia, according to an analysis from Wood Mackenzie.
Colder weather globally could raise European heating demand to 20 billion cubic meters (Bcm) and redirect up to 10.5 Bcm of cargoes from the continent to Asia. Togeteher that would be greater than the 29 Bcm Wood Mackenzie expects to be in European storage at the end of March.
“There is a risk storage levels could drop to zero,” said Wood Mackenzie VP of Gas and LNG Research Massimo Di Odoardo.
Europe would then have to rely on “timely approval” of the Nord Stream 2 pipeline or increased Russian exports through Ukraine, according to Di Odoardo. NS2 could deliver up to 12.5 Bcm through the winter, but it is so far unclear whether the project will move ahead in time.
“The sky could be the limit for European gas prices this winter,” Wood Mackenzie said.
Goldman Sachs analysts also commented on the Russian outlook, saying:
“In our view, uncertainty remains regarding potential Russian gas flows to Northwest Europe this winter”.
If Russian flows increase Goldman expects EU prices to decline from current levels but still be above the threshold for gas-to-oil switching of $27/MMBtu “until we know more about winter weather,” the analysts said.
UK steel industry is the latest to seek government help
Britain’s steel sector has asked for short-term subsidies to help it survive the impact of the energy price rises.
Gareth Stace, director-general of UK Steel said the industry, which employs 31,000, needed temporary help to “shield” it from surging gas and electricity costs.
Mr. Stace added: “If the government doesn’t step in, then how many of those jobs will it see go and then cause a bigger bill for the taxpayer going forward if these people that currently work in the steel industry are out of work?”
Steel companies were said to require help over the next few weeks rather than months, with Stace saying: “We don’t have that luxury of time.”
UK Steel said that surging gas prices could mean some plants have to halt production “for increasingly extended periods with the consequences not only for individual companies but also UK steel supply to the UK economy and UK jobs”.