Natural gas prices swung wildly on Wednesday as Vladimir Putin vowed to boost supplies to Europe in the face of unprecedented pressure on households and businesses.
Month-ahead natural gas contracts surged 40pc on Wednesday morning, climbing above 400p a them for the first time in Britain, as politicians on the Continent pledged to take action to cushion the impact.
They fell back below 300p after the Russian president said he would seek to solve the crisis by pumping more gas into the European Union.
However, prices remain almost seven times higher than normal in Britain, landing heavy industry with huge bills and pushing domestic suppliers to the brink of collapse.
The huge fluctuations astounded analysts more used to movements of a few percentage points a month.
Tom Marzec-Manser, of the data company ICIS, said: “To have those sorts of intra-day swings … it’s ridiculous, astonishing.”
Steelmakers and other industrial users in the UK are demanding action from the Government to help them cope, while experts predict the price cap on energy bills could climb by almost £400 to nearly £1,700 a year in April when the surge feeds through.
Prices have been climbing for months due to a global supply crunch triggered by factors ranging from lower output in the North Sea, higher demand in Brazil and Asia, and constraints on supply in Russia.
Mr Putin said Russia stood ready to help stabilise markets and could export record volumes of gas this year. He has asked his Government for proposals on how to stabilise energy markets, Bloomberg reported.
Mr Putin said: “Let’s think through possibly increasing supply in the market, only we need to do it carefully. This speculative craze doesn’t do us any good.”
MEPs have called on the EU to investigate Russia’s role in the crisis amid concerns Moscow is withholding supplies to increase pressure on Germany over Nord Stream 2, something the Kremlin denies.
Analysts have questioned whether Russia has the capacity to send more despite Mr Putin’s comments, given its own production outages, domestic demand, and contracts with Turkey and China.
One turning point could come at the start of November, when Russia’s timeframe for filling up its own gas storage sites ends and it may have more supply to send to other markets.
With businesses and households facing rising costs, the EU pledged on Wednesday to set out recommendations for member states such as compensation for vulnerable households, tax cuts and state aid for companies.
Kadri Simson, the energy commissioner, told the European Parliament: “This price shock cannot be underestimated. It is hurting our citizens and in particular the most vulnerable households, weakening competitiveness and adding to inflationary pressure. If left unchecked, it risks compromising Europe’s recovery as it takes hold.”
UK households are shielded to a degree from wholesale prices by the cap on energy bills, but this has already risen and is likely to jump again when it is recalculated in April.
Cornwall Insight, the energy consultancy, predicts it could rise by £383 to £1,600 – a roughly 30pc increase, having already climbed by £139 on October 1.
Soaring wholesale costs have already pushed nine household suppliers out of business this month. These failures will push up bills as the industry recoups the cost of picking up customers from failed businesses.
Several more suppliers are expected to collapse within weeks. Moody’s, the credit ratings agency, says the bill for supplier failures could top £1bn.
The UK Government is coming under further pressure to protect companies as well as households. The Energy Intensive Users Group, which represents heavy industry, has called on the Government to cap its carbon, gas and power costs.
Dr Richard Leese, the group’s chairman, said all its members were experiencing similar levels of discomfort: “The situation is very fragile and it really does need some intervention by Government and Ofgem.”
Stephen Elliott, chief executive of the Chemical Industries Association, said: “You may have some companies contracted through to see this out, but there will be others who are maybe coming to the end of their contract.
“We have a price cap that effectively protects domestic consumers from those record gas prices – why can’t we have one for energy intensive users?”
The lobby group UK Steel said that a straw poll of its members found that most steelmakers plan to slap a surcharge on prices for their customers to cover power costs and many have already done so.
Last week, British Steel, the country’s second-biggest producer, placed a £25 per ton tariff on steel to help it cope with higher energy prices and added £5 per ton to cover rising transport costs.
Gareth Stace, UK Steel director-general, said: “Punishingly high electricity prices in the UK continue to batter the UK steel sector. It is now uneconomical to make steel at certain times in the UK, even in an otherwise strong global steel market.”
A Beis spokesman said: “We are determined to secure a competitive future for our energy intensive industries and in recent years have provided them with extensive support, including more than £2bn to help with the costs of energy and to protect jobs.
“Our exposure to volatile global gas prices underscores the importance of our plan to build a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels.”