After a very warm start to January, gas prices are still below pre-war winter levels in Ukraine. High filling levels of European gas reserves in particular are driving down gas prices. But the greater availability of LNG is also pushing down the price on the TTF.
The gas price has fallen further this week. On Monday, November 11, the price on the TTF was at the highest point of the week, at €65,35. Until Monday, January 16, the gas price fell to the lowest level since September 8, 2021. The purchase price of a megawatt hour of gas at that time was €55,45. Afterwards, the gas price rose slightly again. At the time of writing (Wednesday, January 18), the gas price is €63,40.
The fact that the gas price has risen slightly since January 16 is mainly the result of colder weather. The winter got off to a very mild start. Until the beginning of this week, temperatures were even regularly above 10 degrees. Because heating systems are being switched on again on a large scale in Northern Europe, gas consumption will increase significantly in the coming weeks.
However, the increase in gas prices appears to have been limited so far. On the first colder day (February 17), the gas price rose by about €5. The next day the increase weakened to around €3,40. When the mercury dropped at about the same rate in the fall, the gas price rose from €97,85 to €124,10 in two trading days. Due to the small increase, the gas price is below the level of the same period last year, despite the colder weather.
The fact that the gas price is rising to a limited extent is due to the high filling rate of European gas reserves. European stocks are currently 82% full on average. Normally the European filling level is around 70% in mid-January. This high filling level is the result of low European gas consumption. The mild winter and record production of renewable energy caused a significant drop in European gas demand this winter. Because shortages this winter are now virtually impossible, the gas price will remain low and stable compared to the rest of 2022.
Significant LNG supply to Europe
The greater availability of liquid gas also pushed European gas prices down this week. Because China's LNG upload capacity was fully utilized on Monday, November 16, tankers shifted their course from China to Europe. The rate for this additional LNG import was also relatively favorable. Since August, the price of LNG has more than halved.
In addition, the increased European upload capacity of LNG also brings peace to the gas market. On Sunday, January 15, Germany opened its second LNG terminal in Lubmin. What is special is that this terminal is completely privately owned. The terminal must supply Germany with 5,2 billion m3 of gas annually.
Long-term imports not yet guaranteed
Despite the vigorous imports of liquefied gas, it remains exciting whether Europe will be able to obtain sufficient LNG in the long term. The fact that Europe was able to import more than enough liquefied gas this year is the result of a sharp decline in Chinese LNG imports. Last year, China imported 19% less LNG than in 2021.
This winter, a substantial part of China's gas-intensive industry came to a standstill due to several major lockdowns. Now that China is loosening its strict Covid policy, analysts expect Chinese LNG demand to recover quickly. This makes it very likely that competition in the liquefied gas market will increase sharply in the coming months.