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Analysis Natural gas

Gas price takes a clear step back

16 February 2022 - Jurphaas Lugtenburg

European gas prices have taken a clear step down in recent days. The talks between Germany and Russia and the message from the Kremlin that some of the troops are withdrawing at the Ukrainian border have calmed the market somewhat. The supply of LNG also depresses the gas price.

The quotation of natural gas on the Dutch TTF futures market is falling. Last week the price already fell below €75 per MWh, with €74,35 per MWh as the lowest price on Thursday 10 February. On Monday 14 February, the quotation rose again to €80,77 per MWh. In recent days, however, a sharp decline has set in again and on Wednesday 16 February the TTF stands at €70,40 per MWh. That is the lowest price in a month and a half.

Analysts indicate two important developments for the calming market. First up: the conversation between Russian President Vladimir Putin and German Chancellor Olaf Scholz. Putin has indicated that Russia does not want war in Europe. Scholz called on the Russian president to remain in talks with the West so that both sides do not come to a dead end. In view of the price trends, the parties on the gas market appear to attach more value to the consultations between Russia and Germany than to the visit of French President Macron a week earlier.

The message from the Russian Defense Ministry that some of the troops are returning to their bases also somewhat removes the perceived acute threat of a Russian invasion of Ukraine. The large-scale military exercises continue, but the units of the southern and western military districts are done, a Russian defense spokesman told Interfax news agency.

European Union is working on an alternative
The European Union, meanwhile, has discussed with the United States, Qatar, South Korea, Egypt, Azerbaijan and Nigeria the possibilities of increasing supplies of natural gas and LNG, should Russian gas supplies be scaled back further. President Putin denied after the conversation with Scholz that he wanted to turn off the gas tap to Europe. European Commission President Ursula von der Leyen said on Tuesday, February 15, that according to the models, a partial disruption or further restriction of supply by Gazprom can now be accommodated. But if the Russian supplies completely disappear, additional measures will be needed. Several analysts also point out that the mild winter has played into Europe's hands. The pressure on stocks was therefore less than expected in the doomsday scenarios of December, when the gas price reached unprecedented heights.

LNG producers from the United States benefit from the energy situation in Europe. For the third month in a row, Europe is by far the most important destination for American LNG. Not only is the volume large, but the price is also high. Russian Deputy Prime Minister Alexander Novak said today that Europe's hunger for LNG may cause a gas crisis in Asia, Reuters reported. According to Novak, Europe should better focus on long-term contracts to reduce the risk of shortages. Commissioning the Nord Stream 2 - which runs from Russia to Europe - could help stabilize the gas market, the deputy prime minister said.

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Jurphaas Lugtenburg

Is editor at Boerenbusiness and focuses mainly on the arable farming sectors and the feed and energy market. Jurphaas also has an arable farm in Voorne-Putten (South Holland). Every week he presents the Market Flash Grains

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