Record gas prices hit bonds as investors fear wider damage
European natural gas prices shot to record highs on Tuesday, dragging down bond markets in a sign that investors were expecting wider economic damage.
European gas contracts for delivery in November leapt 23 per cent to €117.50 a megawatt hour, up from just €18 six months ago, on the prospect of supply shortages over winter. UK prices also soared, breaching £3 a therm for the first time, with prices tripling in the past two months.
The latest price gains mean gas in the UK and Europe is trading at more than $200 a barrel of oil equivalent — or almost three times the price of crude — with inflationary effects threatening to ripple through economies reliant on gas for heating and power generation.
Surging energy prices, which stem from a rapid increase in energy demand since lockdowns eased as well as government moves to cut reliance on highly polluting coal, have put pressure on governments and policymakers in Europe. Spain, Italy, France and Greece have already agreed subsidies to protect households from higher costs.
https://www.ft.com/content/c94cee7d-4ffe-4946-a83b-b4f85026b74f
Much of this is driven by speculators in the futures market.
