Russia is also the most important mood maker on the gas market, although there are more factors at play. Partly due to the mild winter, the immediate crisis on the market has averted, but there are many factors that pose a risk to the European gas supply, both in the short and longer term.
One week ago, on Wednesday 16 February, the TTF gas futures market closed below €70 per MWh for the first time since November: at €69,80 per MWh. In the following days, the quote climbed again, but remained below €75 per MWh. The mood in the market changed on Tuesday 22 February. Compared to Monday 21 February, the price rose by 10% to €79,79 per MWh. This increase is also continuing, with a price around €88 per MWh. That's the highest price this month, but not quite as extreme as the peak in December; then the quote briefly touched €180 per MWh. A price increase of about 20% in two days is extreme, but the relatively mild winter, the extra supply of Norwegian gas and the large supply of LNG have had a dampening effect.
Most analysts agree on the cause of the price hike: the unrest in eastern Ukraine. Europe is heavily dependent on gas from Russia and there are serious concerns about security of supply if a major military conflict arises. The fact that German Chancellor Olaf Scholz indicated that he is suspending the approval of Nord Stream 2 adds additional uncertainty. Ukraine remains an important transit country for gas from Russia.
Few alternatives for Europe
Looking beyond the news from Russia, analysts warn of a tight supply of LNG on the global market. By outbidding Asian countries and efforts by the United States, the European Union and allies to send as much LNG as possible to Europe, a direct crisis has been avoided. However, competition in the world market is increasing. China is experiencing a cold period, which is pushing demand in Asia (and thus prices) up.
Qatar's energy minister Saad al-Kaabi warned on Tuesday that the problems are not over. "Russia supplies 30% to 40% of the gas to Europe," Kaabi told Reuters. "There is no country in the world that has sufficient capacity to absorb that." In addition, he points out that a large part of LNG production is supplied to regular customers under long-term obligations and that these contracts cannot be broken open just like that. According to Kaabi, Qatar - which is one of the largest LNG producers - can divert about 10% to 15% of production to Europe.
Will the stock be replenished?
Replenishing the European gas supply could become a challenge next summer due to the high prices. The lowest futures market contract for the summer is 'August 2022' and that stands at €78,59 per MWh. The most expensive contract for next winter is 'February 2023', with €79,77 per MWh. The prices will not really fall until April 2023, with €53,54 for April 2023 to €48,88 in June 2023. Due to the relatively small difference between the summer contracts and the winter contracts for the next twelve months, it is less interesting for commercial parties. gas in advance. And if buyers are cautious about buying, there is no incentive for producers and traders to build up stocks. After all, they run a risk on the stock.