Millions of homes can look forward to lower energy bills in 2020 after the market price for gas fell by half in the last year to reach lows not seen in a decade.
Suppliers are expected to cut their dual-fuel tariffs as energy market prices continue to tumble in the new year because of a growing glut of gas in the global market.
The market price for gas has plummeted across Europe as a record number of cargoes from the US, Russia and Qatar have flooded into the continent.
In the UK the market price for gas hit 10-year lows of 24.75p per therm in September, compared with an average price of 55.63p in the same month last year as imports of liquified natural gas (LNG) reached new highs.
The record number of seabound cargoes arriving on UK shores has kept gas market prices below 40p per therm, even as temperatures fall, and experts believe the price will drop further in the months ahead.
Energy analysts at Cornwall Insight have predicted that the record high gas imports could mean falling energy bills for millions of homes covered by the government’s energy price cap this summer.
Ofgem lowered winter energy bills for 15 million households earlier this year after a steady decline in energy market prices. The energy regulator is expected to cut bills even further when it updates the cap in April.
James Brabben, an analyst at Cornwall Insight, said gas market prices have fallen by a fifth since the regulator’s last energy price cut after a mild start to winter and a deluge of gas supplies in the European market.
“A significant fall in gas prices is likely to result in lower tariffs for customers,” Brabben said.
Octopus Energy became the first supplier to announce a 2020 energy price drop after promising to cut an average of £160 a year for almost 250,000 customers on standard variable tariffs.
The renewable energy company said it would pass on the benefit of falling wholesale prices from 15 January.
James Huckstepp, an analyst at S&P Global Platts, said gas contracts are expected to fall by a further 30% to an average of 27p per therm in 2020 because more LNG is predicted to make its way to Europe’s gas storage surplus at record levels.
“This trend is set to endure into 2020 as the US continues to ramp up its LNG export capacity while Russia, which is Europe’s largest gas supplier, refuses to reduce flows to Europe as it seeks to protect market share despite low gas prices,” he said.
The UK has imported a record number of LNG cargoes in the last year as the US and Russia compete for dominance in the growing market.
Ed Cox, an LNG expert at ICIS, said the number of cargoes has been “the most we’ve ever seen – and the outlook is for the same again next year”.
LNG deliveries more than doubled from 5m metric tonnes last year to more than 12m tonnes of LNG in 2019. Qatar has supplied the UK with LNG cargoes for years and remains the UK’s largest source of LNG, followed by Russia and the US.
