The fall in the gas price continued last week, but the listing on the TTF is now beginning to stabilize somewhat. The gas crisis thus appears to have been averted. Several analysts warn that this is certainly not the case yet. The large supply of LNG, the relatively large European stock and the mild weather are turning out favourably, but sufficient gas for the entire winter is not a certainty.
The gas quotation on the TTF futures market is starting to stabilize. On Monday, October 24, the price fell narrowly below €100 per MWh for the first time since July at €99,17 per MWh. Yesterday the TTF closed at €100,41 per MWh. Today (Wednesday, October 26), the price at the time of writing is €100,31 per MWh. Compared to the peak in the summer, the gas price has fallen by about two-thirds. Compared to the same period last year, the price is still approximately 12% higher.
A successful supply of LNG and therefore a relatively rapid build-up of the stock is seen by analysts as an important cause for the sharp drop in the European gas price. The filling level of European gas storage facilities is approximately 94%. In Germany, storage facilities are even 98% full. The European target was a filling level of at least 80% on November 1. Last year, European storages were 77% full at this time.
Major differences in contracts
The supply of LNG is now running so well that European terminals are having difficulty unloading all ships quickly. 60 LNG tankers are waiting to be unloaded, according to MarineTraffic data. This is not only because the capacity limits of the terminals have been reached. The daily rate for the current contract on the TTF has fallen to a level of around €100 per MWh, but the December contract stands at €130 per MWh. For the trader it is a simple calculation. If the difference between the November and December contract is greater than the costs of renting a tanker, it is worth waiting before unloading. The TTF futures market works on settlement by physical delivery. The difference between the November and December contracts is also a sign that there is still a lot of tension in the market. The prices generally converge as the current contract approaches expiration. The big question is whether the daily rate is too low and will therefore rise in the near future or whether the December contract is too expensive and will have to take a step down.
Due to the falling gas price in recent weeks and the large supply, the gas crisis appears to have been averted for the time being. Several experts warn that this is certainly not yet the case. Europe is fortunate that autumn has been relatively mild so far and the weather is likely to last for another two weeks according to the models. The demand for gas is therefore relatively low for this time of year. The supply of electricity generated by wind turbines also dampens the demand for gas from power stations. However, the current supply of gas is only sufficient for approximately two months of European use. If both Europe and Asia experience a severe winter, demand for LNG on the spot market could pick up again, resulting in significantly higher prices.
Consultation and cooperation
Perhaps the greatest danger, according to several analysts, is that companies and politicians think that we will get through the winter and are now resting on their laurels.
A sign of this may be that European leaders did not reach an agreement on reforms in the energy and gas market on Tuesday, October 25. Among other things, whether or not to introduce a price ceiling for gas was on the agenda. The hot potato has now been pushed to the next summit on November 24. The Forum of Gas Exporting Countries (GECF), including Russia, Iran and Qatar, warned yesterday against 'politically motivated' price ceilings. "Such interventions in the market could exacerbate bottlenecks, discourage investments and harm producers and consumers," the gas cartel warns. According to the GECF, the market benefits from consultation between gas producers and consumers to restore the market to balance. According to the cartel, the current imbalance in the market has already started due to reduced investments in gas production from 2015. The current bottlenecks in the gas market are not over yet. According to the GECF, the new projects will only produce gas after 2025.