The gas market seems to have found a new balance. Due to the lower temperatures this month, the gas price is about 20% higher than last month. According to analysts, declining filling levels in particular are responsible for the higher gas price. Although the disagreement in Brussels still seems to be calming down the gas market. While the price of gas is slowly but surely rising, the member states of the EU remain divided about a possible price cap.
Over the past seven days, the gas price has fluctuated between €134 and €147. On Wednesday, September 30, the price on the TTF was at the highest point of the week, at €146,40 per megawatt hour. Then the price dropped. Gas was cheapest on Monday, December 5. The price per megawatt hour was then €134,70. This increase seems strong, but between October 17 and November 30 the TTF price was consistently lower. The gas price has now risen again. At the time of writing (Wednesday, December 7), the TTF rate is €141,75.
Lower temperatures remain the main reason for the rising gas price. Due to mild autumn weather, less gas was used than normal until the beginning of November. As a result, the quotation on the TTF was lower than the rest of the year. Now that temperatures have normalized somewhat, the gas price seems to be returning to the course of the rest of 2022. According to analysts, the declining filling rates of European gas reserves in particular are causing tension on the gas market. However, extreme volatility has not occurred because the filling rate is still higher than average and ahead of government targets.
Yet analysts are slowly but surely becoming more concerned about the long-term perspective. It has been known for a long time that it will be a lot more difficult to replenish the gas reserves next winter. But now some analysts are warning about availability this winter. If it gets colder than usual this winter, shortages could arise. In the EU, too little gas is currently being saved to guarantee security of supply, these analysts believe.
Fight over maximum price keeps Brussels in stitches
Not only analysts are tense, because there is also unrest in Brussels. A new proposal for a maximum gas price was circulated in European politics on Tuesday, December 6. According to various sources, a price ceiling of €220 was discussed. This is a compromise between the maximum of €275 proposed by the committee two weeks ago and the €150-€180 that mainly Southern and Eastern European member states have in mind.
It's not just the price that changes. The conditions of the price ceiling are also being tinkered with. According to the current proposal, the price ceiling will be set if the price of the TTF rises above the maximum price for five days. Within the first proposal, the threshold value had to be exceeded for two weeks before the price ceiling took effect. In addition, according to the current proposal, the price of LNG must be €35 above a reference price for LNG yet to be determined, previously it was €58.
Dissatisfaction
With the price of €220, the EU seems to be proposing a compromise that no country can agree with. Germany and the Netherlands still believe that no maximum price should be introduced at all. As a result, high gas prices could cause suppliers to ignore Europe, these countries say.
The camp from Belgium, Spain, Italy and Poland, among others, believes that a permanent price ceiling of €1 should apply on January 2023, 160. In addition, these countries want the price ceiling to be introduced immediately. They thus object to conditions such as an exceedance period of five days.
These countries also find a dynamic price ceiling acceptable, where the maximum price depends on the current value on the world market. However, such a measure was written off by European officials at the beginning of November. The measure would be too complex to implement in practice.
To get everyone on the same page, the member states will hold one more conclave on December 13. However, so far there are no indications that the camps are willing to compromise.