Gas prices fell below $2021 this week for the first time since the summer of 50. Due to a larger supply, the gas price fell by almost €5 this week. However, there is also some upward price pressure. Because it will be colder in the coming weeks, analysts expect gas demand to increase in the coming period.
The gas price is currently fluctuating around €50. On Wednesday, March 15, the gas price was at its highest point of the week. On that day, gas traded for €54,72. After that, the gas price fell sharply. On Tuesday, February 21, the gas price was still 48,54. A small correction took place on Wednesday, February 22. At the time of writing, the gas price stood at €50,20.
The gas price fell below €24 this week for the first time since September 2021, 50. The main reason for the drop in gas prices was increased supply. This week, for the first time in 2023, more Norwegian gas flowed to Europe. Maintenance started at several Norwegian gas fields at the beginning of winter. The first maintenance now appears to have been completed, which means that the Norwegian supply is structurally increasing again.
In addition, America's second largest LNG producer, Freeport-LNG, appears to have returned its production close to previous levels. Eight months ago, Freeport's production came to a standstill due to a fire. The company has been trying to resume their activities since the beginning of February. Since last week, gas has been flowing to LNG ships again and since this week the supply has increased considerably. Production is now at a higher level than before the fire. This will give the global LNG supply a significant boost. Freeport is able to convert approximately 2% of all US natural gas into LNG.
There is a risk in the current low gas price. Analysts warn that gas consumption could increase due to low prices. "The gas price is currently so low that the most efficient gas-fired power stations produce cheaper electricity than coal-fired power stations. In addition, we are not far from the point where inefficient gas-fired power stations also fall below the price of coal power," gas analyst Christopher René told Bloomberg. It is precisely through substantial savings that the gas price has been brought back under control. A gas price that is too low could well be at the expense of the current stability on the gas market.
Colder weather creates upward price pressure
However, there was also occasional upward price pressure this week. The fact that the gas price rose on Monday 20 and Wednesday 22 February is mainly due to less favorable weather forecasts. The warm period that Europe is currently experiencing will come to an end at the end of February. European temperatures will normalize until at least March 3. Due to higher gas demand for heating, analysts expect the price on the TTF to rise slightly in the coming weeks.
Although that increase will probably remain limited. European gas reserves are currently approximately 64% full. This means that the average European filling rate is approximately 10% above the ten-year average. This means that Europe has sufficient gas in stock to withstand even the most extreme scenarios.