- Brent crude drops below $80, easing fuel costs
- Norwegian gas pipeline fracture raises supply concerns
- Repair impact on energy bills expected post-September
Although a critical gas pipeline operator cautions that a fracture could significantly affect supply, drivers can take comfort in the fact that Brent crude oil has fallen below $80 per barrel.
The wholesale costs of natural gas in Europe have reached their highest levels since December of last year, which threatens future increases in energy bills. However, drivers may shortly receive additional fuel relief due to a decline in oil prices.
On Monday, Brent crude fell by over 3%, reaching a low of just below $78 per barrel at one point, amid market speculation that key oil-producing countries in the Opec+ group, which includes Russia and Saudi Arabia, were planning to increase their exports later in the year.
The international benchmark trading market returned to levels last observed in February.
The oil price declined after the news that critical Norwegian export operations had been closed due to a ruptured pipeline, while natural gas prices reversed the trend.
According to pipeline operator Gassco, the Nyhamna processing facility, which exports gas to the UK, was temporarily suspended due to damage discovered aboard the Sleipner Riser platform.
Alfred Hansen, the company’s director of pipeline system operations, told the Reuters news agency, “This has significant implications from a supply standpoint.”
He also mentioned that there were alternatives to circumventing Sleipner, but they were both time-consuming and dangerous.
The fracture’s potential repair time was not estimated.
The shutdowns will impact deliveries to the Easington terminal, which is situated off the Humber estuary and is one of six significant import and storage facilities in the United Kingdom.
According to LSEG data, the UK contract for July delivery increased by 10% to 90p per therm after the unplanned closure announcement.
The price in question was last observed after December of the previous year.
The principal European front-month contract also experienced a 2024 high as deliveries to countries like Germany dropped. The situation was similar.
In 2022, Norway emerged as the largest gas supplier in Europe as a result of the international backlash that Russia experienced in response to its invasion of Ukraine.
In recent weeks, prices have been volatile due to the coincidence of maintenance schedules in Norway with assaults on Russian infrastructure.
The instantaneous price increase could have been more severe had the outage occurred during the winter season, which is the period of highest demand.
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Nevertheless, the prolonged damage to imports will influence the energy costs of households and businesses in the winter of 2024/25.
The impact would not be apparent until at least September.
The UK regulator, Ofgem, announced last month that the average annual bills under the energy price limit would decrease by over £100 from July to September.
Although that level has been established, modest increases are currently anticipated for the subsequent two three-month periods, which are anticipated to be colder.
A spokesperson for Gassco stated, “We are currently developing a plan for repairs and compensatory measures to ensure that the highest possible volume is delivered to Europe.”
