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UK price for winter gas falls on news of Russia-Ukraine supply deal

The price of gas for delivery this winter slumped almost 2.5 per cent on Friday afternoon on news that Russia and Ukraine have agreed a gas supply deal covering the next six months.

Market sources told Utility Week that the price of winter gas on the UK wholesale market rose from Thursday’s close of 58.80 pence per therm to 59.20 p/th over Friday’s trading session, but prices reversed the trend to tumble down below 58 p/th following news that an agreement in principle was reached between the two countries.

The contract price of winter 2014/15 gas was last heard trading at around 57.80 p/th, a trader told Utility Week shortly after 16.00 BST, almost 2.5 per cent below its intraday high.

Over recent months market players factored in a risk premium to gas prices due to concern that supply from Russia, Europe’s largest gas supplier, might be disrupted due to tensions with its neighbour and key gas-transit state Ukraine.

Uncertainty over the volatile situation in the region supported gas prices across Europe despite an otherwise bearish market for gas due to low temperature-led demand last winter and healthy gas storage levels as a result.

A UK power trader told Utility Week that gas prices are now falling faster than wholesale power prices which could mean more favorable market conditions for gas-fired power generators.

UK power prices are expected to remain supported by the looming capacity crunch expected this winter following a string of unplanned outages.