Fall in summer wholesale gas price raises hope for inflation outlook

European prices fell as tensions eased over Ukraine

Gas futures declined after French president Emmanuel Macron said that he received assurances from his Russian counterpart Vladimir Putin that Moscow would not further escalate tensions over Ukraine. Picture: AP

European wholesale gas prices fell as tensions eased over Ukraine, suggesting a glimmer of hope for inflation pressures and household energy bills.

The price of gas for delivery in June fell 4.7% late yesterday, according to the so-called TTF Dutch contract, helped by milder weather across Europe.

Gas accounted for over a third of all the power generated on the grid in Ireland in recent weeks and the fuel normally accounts for a larger share over the full year as the contribution of wind to generating power falls back after the winter.

The wholesale price of gas can therefore be an early indicator for pressures on retail household gas.

Gas futures declined after French president Emmanuel Macron said that he received assurances from his Russian counterpart Vladimir Putin that Moscow would not further escalate tensions over Ukraine.

It remains to be seen whether the shuttle diplomacy between Paris and Moscow will lead to some sort of deal that deescalates the tensions for good.

An official in Mr Macron’s office later said the French president’s remark that Russia would not escalate military activity further was not a firm commitment, but rather conditional on his view of the evolving situation. A Kremlin spokesperson also cast doubt over the comments.

Rising inflation

Amid shortages of energy, Ukraine has been the latest crisis that has helped reignite inflation across Europe. Irish inflation reached a two-decade high of 5.5% in December driven by the soaring costs of energy products.

US president Joe Biden had said earlier this week that the Nord Stream 2 gas pipeline that will link Russian gas supplies with major customer Germany would be halted if Russia invaded Ukraine and stressed unity with German chancellor Olaf Scholz as the West rallies to avert a war in Europe.

Russia has amassed some 100,000 troops near the Ukraine border. It denies it is planning an invasion.

US officials had said an attack could occur within days or weeks.

Even before the pipeline starts flowing, Germany uses Russian gas to cover half its needs.

Crude oil

Meanwhile, the price of global crude oil slipped to about $91 (€79) a barrel yesterday before a resumption of indirect talks between the US and Iran, which could revive an international nuclear agreement and allow more oil exports from the Opec producer.

Brent crude had hit a seven-year high of $94 a barrel earlier this week.

Prices were also dented by the comments from Mr Macron, who said his meeting with Mr Putin had helped to prevent a worsening of the Ukraine crisis.

Eight rounds of indirect talks between Tehran and Washington since April have yet to result in an agreement on a resumption of the 2015 nuclear pact, with differences remaining over the speed and scope of the lifting of sanctions.

Oil has found support this year from rising global demand, Russia-Ukraine tensions, supply disruptions in producers, and a slow easing of 2020’s record output cuts by Opec.

• Additional reporting Bloomberg and Reuters