Stable price masks tension in gas market

At the moment the prices of the TTF are stable. On Wednesday, November 2, the gas price was highest at a stand of €125,86. After that, the gas price generally fluctuated between €118 and €109. The lowest level reached the TTF on Monday 7 September. At that time, a megawatt hour of gas cost €109,68.

In particular, the high degree of filling of the European gas reserves ensures stability. Normally, more gas is used during the fall than is stored. Due to substantially lower demand, the mark-ups remained at the same level this year. In October, the Netherlands consumed 34% less gas than usual. This large saving is mainly due to the continued mild weather. Because the heaters remained at a lower setting, consumers have used about 50% less gas to date.  

It is not only consumers who keep their consumption low. Gas consumption from industry is also lagging behind previous years. In response to the high gas price of last summer, several industrial large users reduced their production. As a result, industrial consumption fell by about 20%. In addition, less gas is burned to generate electricity. Due to the sunny weather this autumn, not only wind turbines, but also solar collectors supplied a lot of energy. In October, it was not uncommon for about a third of all energy to come from renewable sources. This relieved some of the pressure at gas-fired power stations.

Tension in the market
The fact that the gas price remains reasonably stable does not mean that there is little tension in the market. The gas price is still almost twice as high as it was in the fall of 2021 and almost six times as high as in previous years. The high price is maintained by various uncertainties. For example, the Russian gas supply has come under further pressure this week. Following the suspected sabotage at Nord Stream's pipelines, doubts are growing about gas supplies via the Yamal pipeline, which runs through Poland to Germany. Several times this week the guest bank was lowered via the pipeline. While supplies have steadily recovered within days, analysts fear that Russia will also export less gas to Europe through this pipeline.

There is also uncertainty in the field of LNG. Last summer, the EU imported record volumes of liquefied gas. Now that the gas stocks are well stocked, imports have fallen considerably. In part, the import is lagging behind because the maximum LNG capacity had already been used. But the low gas price is also an obstacle to the import of LNG. It is currently not attractive for exporters to sell liquefied gas on the European market. If the gas price remains so low, it remains to be seen whether Europe will remain an attractive market. Several analysts expect exporters to prefer to supply traditional major importers such as Japan and South Korea in the short term, as prices in that market are more likely to rise.  

European price ceiling is dented
At the moment, European politics is not bringing relaxation to the gas market either. Today, 9 November, the European Union's officials labeled the European price ceiling as impracticable. The European Union plans to introduce so-called dynamic price caps. These are price ceilings that move with the prices on the gas market. In this way, the EU believes it can prevent Member States from bidding against each other unnecessarily, without endangering the security of supply. If the price on the world market rises above the European ceilings, Brussels raises the ceiling. This should prevent suppliers from ignoring European countries to sell their gas on more lucrative markets. However, several Member States were able to enforce that existing contracts do not have to comply with the price ceilings. In particular, the complexity that this last exception entails makes the new measure impracticable, according to officials.