The European gas price has found its way down. A large stockpile at the beginning of winter, record imports of LNG and relatively mild weather bring the European benchmark back to a level close to pre-Russian invasion of Ukraine.
At the beginning of this month, a cold period caused a price increase on the gas market. On the TTF the rate was again close to €150 per MWh. However, a steady decline has started since December 7. Yesterday (Tuesday, December 27) the quotation on the TTF dropped to €80,04 per MWh. That is the lowest price since early June and is close to the price of gas just before Russia's invasion of eastern Ukraine. Today the price fell even further during the trading day to €76,18 per MWh, the lowest price since the end of February. While writing, the price has already risen and stands at €84,18 per MWh.
Well-stocked European gas storage facilities are cited by experts as an important factor for the downward trend in gas prices. The filling level in German stores was 26% on December 88,6. The EU average stood at 83,2% on the same date. That is well above the five-year average for this period. The weather is also favorable to the EU in terms of expected gas consumption. The weather models predict an average or above average temperature until mid-January. Wind in the forecasts is also favorable for generating electricity with wind turbines, allowing gas-fired power stations to slow down a bit.
Looking for the bottom in the market
The EU has so far succeeded in securing sufficient LNG on the world market. Last fall, sellers explored the top end of the LNG market. How far can we push the LNG price up before European buyers drop out? That was the question suppliers seemed to be asking themselves. That question has now turned to how far do we have to drop if Asian buyers want to catch up again? China in particular, which has long-term LNG contracts, resells part of this gas to European customers via the spot market, some analysts say. China also needs energy itself, but is switching to cheaper coal. In addition to the consequences for the climate, the additional use of coal has quite a negative effect on air quality in major Chinese cities. Partly for this reason, it remains to be seen at what coal and LNG price the turning point lies for the Chinese authorities. The much-discussed European price ceiling seems to be the obvious choice for this winter, according to some experts. The price ceiling comes into effect if the gas quotation on the TTF closes above €180 per MWh for three days in a row and if LNG exceeds €35 per MWh.
Russia is exporting a quarter less gas this year than last year. Russian Deputy Prime Minister Alexander Novak reported this to the Russian news agency TASS. Gas production will be 12% lower, Novak expects. "This is mainly due to the closure of the export infrastructure," according to the Deputy Prime Minister. "For example, exports via the Yamal-Europe pipeline (between Russia and Germany via Poland) have been stopped for political reasons, and this pipeline remains unused."
Since May, gas has no longer been supplied to Poland via this pipeline because this country previously refused to pay for gas in rubles. The Russian state gas company Gazprom therefore says it can no longer supply gas via Poland due to Kremlin sanctions against the Polish company that manages the part of the Yamal pipeline in Poland.