Gas price falls sharply, unrest continues

This week the gas price fell almost constantly. Two major declines stand out. On Wednesday, October 7, the gas price was €149,25 per megawatt hour. In one day the quotation on the TTF fell to €138,89. The gas price also fell sharply between December 13 and 14. On Tuesday, December 13, the TTF rate was €137,53. On Wednesday, December 14, the price had fallen to the lowest point of the week. At that time the price was listed on the TTF at €128,85.

Particularly favorable weather forecasts in January are pushing gas prices down. Due to cold weather, heating systems in Europe are currently having to work hard. Due to higher demand, the gas price has fluctuated between €135 and €150 since the beginning of December. The current cold weather will probably end around Christmas, and temperatures will remain mild in January.

In addition, LNG imports are booming again. At the end of October, LNG imports seemed to come to a standstill due to the relatively low gas price. At that time it was not profitable to sell liquefied gas on the European market. There were fears that ships transporting liquid gas to Europe would divert their way to Asia. With the rising gas price, LNG imports increased again. In November, a record quantity of 11,14 tons of LNG flowed into the European gas network and it appears that the record will be broken again in December. If imports continue at the current pace, 12,2 tons of LNG will be imported this month.

Partly due to the resumed LNG imports, fears of shortages this winter seem to be considerably muted. However, there is still a lot of uncertainty about the winter that will follow. The question is whether it will be possible to fill the gas reserves again at the speed of this year. Imports from Russia are currently negligible and the LNG infrastructure is not yet mature enough to accommodate the volumes we are missing from that country. In addition, it doesn't help that one lot of French nuclear power plants are still out of action. To cope with electricity shortages in France, gas-fired power stations in several European countries, including Belgium and the Netherlands, have to work extra hard.

The EU remains divided on price ceilings
For weeks, two camps within the EU have been fighting over the question of how the price ceiling should take shape. After a proposal for a maximum gas price of €275 per megawatt hour was rejected by the proponents of the price ceiling, the European Commission put a maximum rate of €220 on the table as a compromise. However, both camps did not agree with the new threshold value.

Countries such as the Netherlands and Germany remain afraid that suppliers will ignore Europe when gas prices are high. However, Spain, Italy and Poland, among others, believe that the rate is too high. According to the countries in this second camp, a lower price ceiling should be chosen to ensure that European citizens are protected against high energy prices. On Monday, December 19, the energy ministers from both camps will meet again.

That is why the energy ministers of all European member states met on Tuesday, December 13, to negotiate a new threshold value. There is currently talk of a maximum rate of €200 that will come into effect if the gas price rises above the threshold value for three days. In addition, the trading price of LNG must still be 35 euros above a benchmark to be determined.

While the European Commission is accommodating the proponents of the ceiling, France appears to be withdrawing its support for a price ceiling. Several EU diplomats told Reuters that French support for the price ceiling is wavering. Within Macron's government, the fear that a price ceiling will distort the market prevails. This twist didn't come out of nowhere. Last week, the European Central Bank ruled that the current price ceiling could endanger the European economy.