Euro hits 20-year low and pound slides as Russian gas shutdown rocks markets – business live | Business

As feared, European wholesale gas prices have surged at the start of trading.

The benchmark Dutch TTF October gas contract has risen by 30%, up €62 to €272 per megawatt hours (MWh).

The surge comes as traders react to the continued shutdown in Russia’s gas supplies to Europe through Nord Stream 1.

That pipline runs under the Baltic Sea to Germany, and historically supplied around a third of the gas exported from Russia to Europe (but was already running at just 20% of capacity before the outage for maintenance last week).

Gas prices likely to hit new highs as Russia shuts pipeline indefinitely

Rupert Jones

Analysts are expecting gas prices to surge to record highs this week after Russia shut down the Nord Stream 1 key pipeline to Europe.

Nathan Piper, an oil and gas analyst at Investec, said:

“We are expecting record gas prices across UK/Europe next week as the impact of long-term restrictions of Russia gas supply is absorbed by the market following the indefinite shutdown of the Nord Stream 1 pipeline.”

He added that the gas price “will remain volatile, and I’d expect a sharp move up tomorrow towards record 700-800p a therm highs.

“However, the key and worrying point is that this is in the middle of summer – prices could move higher as demand increases for heating into winter … A big price jump next week has major implications on the [UK] energy price cap, and the cost for business/industry, who don’t have a price cap at all.”

Sterling is also falling in early trading, hitting its lowest point against the dollar in almost 30 months.

The pound has dropped by half a cent to $1.1460, its weakest point against the US dollar since March 20th 2020.

Below that point, it will be the weakest since 1985.

Naeem Aslam, chief markets analyst at Avatrade, says fears of an energy crisis this winter are hitting sterling and the euro.

We believe that the actual reason that we are experiencing such an intense sell for the Euro and Sterling is that traders are worried that as winter is approaching, the situation with respect to energy resources is going to become a lot worse. This is despite the fact that lawmakers in the EU and in the UK are trying their best to assure everyone that they have the situation under control and Russia cannot dictate their future.

However, the reality is that a conflict with Russia has sent the energy prices through the roof in Europe and in the UK. Consumers are struggling every day and worried about their energy bills. There is no short fix for this, given the nature of the economic health of the EU and UK, and a major disaster could be on the horizon.

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

The financial markets are being rocked by the shutdown of Russia’s Nord Stream1 pipeline, as the energy squeeze on European economies intensifies as winter approaches.

The euro has fallen to a two-decade low in early trading this morning, after Russian energy major Gazprom extended the shutdown of its gas pipeline to Germany on Friday evening.

Fears over sky-high energy prices, and possible shortages, pushed the euro further below parity against the US dollar. sending the single currency as low as $0.9879 against the US dollar for the first time in two decades.

Nord Stream 1 was due to restart operations on Saturday morning, after a three-day shutdown for maintenance. But Gazprom dashed hopes of a resumption on Friday night, blaming a leak.

Analysts predict gas prices will soar, having fallen back from recent highs last week.

Michael Hewson of CMC Markets explains:

Russia’s actions on Friday in indefinitely closing the pipeline could see renewed upward pressure on European and UK natural gas prices when markets reopen today, after seeing big falls in prices last week as UK natural gas prices fell 39%, while European prices fell 33%.

European stock markets are heading for sharp losses at the open, with Germany’s DAX down 2-3% in the futures market.

Also coming up today.

The OPEC group and its allies are meeting to set production targets for October today. They’re likely to leave output quotes unchanges, although they could consider a small cut to production to prop up the oil prices.

The latest service sector PMI reports will show how companies in the UK and eurozone fared last month.

And UK car sales are expected to have risen slightly in August, according to the monthly data from the SMMT.

The agenda

• 9am BST: UK new car sales for August

• 9am BST: Eurozone service sector PMI for August

• 9.30am BST: UK service sector PMI for August

• 10am BST: Eurozone retail sales for July

• Noon BST: Opec meeting+ begins