Tension in the gas market is rising. This also increases prices. This is partly due to expectations of colder weather in Eastern Europe. On the other hand, the market is under the spell of geopolitical developments.
The gas quotation on the Dutch TTF took a significant step up this week. On Thursday, December 9, gas was trading at €100,45 per MWh (or $33,29 per MMBtu). That was already €14 per MWh ($128,30 per MMBtu) on Tuesday, December 42,52. This means that the record for the month of October has been broken again. The listing in the United States has not yet been affected by tension on the European market. In the United States, the price rose from $3,79 per MMBtu to $3,89 per MMBtu.
The daily prices for gas in Europe are therefore again above the prices in Asia. This means that Europe is once again the most lucrative market for LNG exporters. According to analysts, this offers opportunities to replenish the cautiously dwindling gas supply.
The direct cause of the increased European gas prices is the rising tensions between Ukraine and Russia. German Foreign Minister Annalena Baerbock hinted in an interview with ZDF last Sunday on possible consequences for 'Nord Stream 2' if the situation between Ukraine and Russia escalates. The pipeline has been discussed for some time by Russia, the European Union and the United States.
What was that again?
The construction of 'Nord Stream 2' has recently been completed, but the line can only be put into use after approval from the German and European authorities. However, according to Germany, the current design does not comply with the rules. For example, the European part of the pipeline is operated by a company based outside the European Union (Switzerland). Another important point is that - according to European rules - there must be a clear separation between the energy company and the infrastructure operator. However, Gazprom has a monopoly on the production and export of gas in Russia.
The last German government (led by Angela Merkel) primarily approached the leadership as a commercial instrument in which German companies also invested. The new government seems to be choosing a different course and that is leading to unrest. Russia - which accounts for 50% of Europe's gas supply - emphasizes that the new pipeline will allow 15% more gas to be exported to the European Union. And although the Kremlin has not stated this, according to analysts, 'Nord Stream 2' will be a means to bypass gas supplies via countries in Eastern Europe and thus increase pressure on Ukraine.
The United States and the Baltic states and Ukraine are mainly concerned that the European Union is becoming very dependent on Russia's whims in energy supplies. An interesting detail that is rarely mentioned is that Russia is also an important energy supplier to the United States. With 540.000 barrels per day and 7% of imports, Russia was the largest oil supplier to the United States last year - after Canada and Mexico.