After a long period of declines, the price of the TTF seems to have found its way up again. Prices remain low. But after a month of optimism about the availability of natural gas next winter, the realization is starting to sink in that the crisis has not yet been completely averted.
The price of gas is on the rise again. Now that the gas price is rising again, it appears that the price on the TTF found a bottom last week. The price briefly fell below €100, but this week the gas price was firmly above that. On Wednesday, October 26, the TTF was at its lowest point of the week at 104,32. From October 31, the gas price remained around €120. On Thursday, November 2, the gas price was at its highest, at €123,72.
The rising prices on the TTF mainly appear to be a correction after the sharp decline in October. After a period of great optimism regarding the availability of European gas this winter, fears about longer-term security of supply are emerging again. Analysts warn against overly optimistic reactions to the expectation of a mild winter. If the European winter becomes harsher than currently predicted, there is a risk that gas reserves will prove insufficient to get through the winter. The realization is also starting to sink in that filling the gas reserves in 2023 will be much more difficult than it was this year.
For the time being, the increase remains limited. The gas price is still a lot lower than in the summer of 2022. The mild autumn in particular has a dampening effect on the price. Just like in other years, a lot of wind energy is generated again this period. In contrast to previous autumn periods, solar panels also provide a lot of energy. In October, about a sixth of all electricity was generated from renewable sources. These favorable yields from renewable sources take some of the pressure off gas-fired power stations.
Even more important are the relatively high late summer temperatures. Because Dutch heating systems remain on a low setting, households have been using about 50% less gas throughout the autumn than in previous years. It's not just consumers who save a lot of gas. Industry consumption is also lagging behind because many major users have stopped production. This results in a saving of approximately 20%. Together this adds up quite a bit. Total Dutch gas consumption this autumn is about 30% lower than in previous years.
Will the gas savings continue?
There is a downside to the lower gas price. The low rate on the TTF may make it more attractive to consume more gas. There are now cautious signals that savings are declining again. For example, almost no coal is currently used to generate electricity, even though coal-fired power stations are still allowed to run at full capacity. The high price of coal and disruptions in the logistics chain mean that it is currently cheaper to burn gas. As a result, the share of gas in the Dutch energy mix is growing.
In addition, it is not inconceivable that the industry will continue its intensive use of natural gas. In fact, slowly but surely, cautious signals are trickling in that the resumption has already started. For example, the Yara fertilizer factory from Sluiskil (Zeeland) is increasing their production capacity from approximately 33% to 65%. This increase in production is typical for European industry. Until recently, the European fertilizer sector was operating at 37% of the maximum, but the factories are now using an average of 63% of their capacity again. Although this does not necessarily mean that all this fertilizer is produced with European gas. Many of the raw materials for fertilizer are manufactured in the United States. Natural gas is currently a lot cheaper there.
If the savings due to the low gas price are disappointing, this could cause problems in the event of a severe winter. According to the International Energy Agency (IAE), saving gas is one of the most crucial strategies to get through the winter of 2022. If the savings are disappointing, shortages may still arise this winter, despite the high filling rates of European gas storage facilities.
LNG imports are stuck
However, it is not only the savings that are at risk of being lost due to the low gas price. European LPG imports are a lot more difficult. Several terminals have used their full capacity, causing transport ships to remain at European ports for another week. Ships are anchored mainly in the Gulf of Cadiz. The supply is simply greater than the capacity that can flow into the grid. In addition, the gas price was too low last week to make exports profitable. The growing demand for LNG from Japan makes it increasingly likely that suppliers of American LNG, among others, will change their course to Asia.