Due to numerous setbacks, the gas price was on the rise this week. Lower temperatures are mainly responsible for the price increase, but Russia is also reigniting the fire on the gas market. Gazprom is now also threatening to halt the last gas supplies to Europe. Meanwhile, the European Union is sowing disagreement with a concrete proposal for the gas price cap. Nevertheless, panic due to the high level of filling of European gas reserves has not yet been ruled out.
Prices on the TTF have risen by about 10% this week. On Thursday, November 17, a megawatt hour still cost €112,56. On Wednesday, November 23, the gas price even briefly exceeded €14 for the first time since October 130. Later in the day this shock was somewhat muted and gas cost €125 per megawatt hour.
The main reason for the price increase this week is colder weather. Due to mild weather, gas prices remained on the low side for almost the entire autumn. Although the weather forecast for this winter is still favorable, the period of extremely mild weather seems to be coming to an end. Temperatures are now normalizing again, which means that the heaters in Northern Europe are running strong again.
Gazprom used this higher consumption to stoke the fire on the gas market. On Tuesday, November 22, the Russian gas company also threatened to halt their last gas exports to Europe. The threat is a response to an alleged act of sabotage by Ukraine. Gazprom accuses the country of blocking Russian supplies to Moldova. Ukraine denies the allegation and emphasizes that Russia is once again using its gas supplies as a geopolitical weapon with the threat. After Gazprom announced the news, the price on the TTF rose by 4%.
Price ceiling rate is known
While Russia increased the pressure on the gas market, there were rumblings in European politics. That same Tuesday, the European Union presented their plans for the gas price ceiling. The final limit will be €275 and will only take effect if a second condition is met. Trading in contracts of €275 will only be prohibited if the price for LNG is at least €58 above a European reference price for LNG yet to be determined.
With the proposal, the European Union deviates from their initial plan for a flexible price ceiling. To prevent suppliers from ignoring the European market when gas prices are high, Brussels was until recently planning to let the maximum price move with the market. In this way, the European Commission believed it could prevent member states from bidding against each other, without the gas price in Europe falling below the rate on the world market. However, on November 9, this plan was scrapped after senior EU officials announced that the plan was too complicated to implement.
According to various sources within the EU, proponents of a price ceiling are dissatisfied with the new solution. These countries had a price ceiling of between €150 - €180 in mind. "Now it appears a price ceiling is being set up that will never come into effect," an anonymous diplomat told Reuters. Even when the gas price exploded this summer, the gas price only exceeded €6 for 275 days. The price on the TTF reached a top of almost €350 during that period.
The new plan therefore seems mainly to be a victory for the Netherlands and Germany, which have opposed the price ceiling from day one. According to these countries, a price ceiling would lead to suppliers ignoring the European market as a whole if the market price rises above the price ceiling.
High filling level cushions setbacks
The fact that the market remains relatively stable despite all these setbacks is mainly due to the high filling rates of gas supplies within the European Union. Due to the high temperatures this autumn, gas reserves in the EU are still approximately 95% full. This makes it very unlikely that the Member States will run out of gas this year. Only an extremely cold winter that lasts for a long time can currently cause shortages.