Due to disruptions in Norwegian gas exports and low temperatures, gas prices briefly rose above €50 this week. In addition, the French protests still caused commotion. In an effort to get a better grip on the gas market, the European Union has also introduced its long-awaited target price for LNG.
The gas price has taken a big step upwards this week, but also corrected sharply yesterday. Gas traded at €29 per megawatt hour on Wednesday, March 42,80. After that, the gas price rose sharply. On Monday, April 3, the price on the TTF was €51,37, the highest gas price since March 10. However, the gas price did not maintain this top price for long. Just one day (on April 4) later the price had fallen again to €48,15.
Disruptions to the gas supply from Norway in particular caused the price spike. Due to maintenance, the Norwegian supply was about 10% lower than normal. The disruption is causing considerable price pressure. Because since Russia drastically reduced supplies to Europe, Norway is the largest gas supplier to the European Union. If Norway can supply less gas, Europe will have to rely on the much more expensive LNG. For example, LNG in the European Union is purchased for €62,87 per megawatt hour, a difference of €11,50 excluding processing costs with the last price on the TTF. It should therefore not be surprising that the gas price corrected sharply after the conclusion that exports from Norway suffered less from the disruptions than initially expected.
In addition to the disruption to Norwegian deliveries, lower than average temperatures are currently causing upward price pressure. For a while it seemed that the heating season was over, but at the moment temperatures remain 3 to 7 degrees lower than average. However, the additional gas demand for heating does not yet appear to have a significant impact on European gas reserves. Despite the lower temperatures, the European filling level remains approximately stable at around 56% this week.
In addition, tension on the French electricity market is causing higher gas prices. Due to strikes around French nuclear power plants, production in the French nuclear sector remains below normal levels. As a result, France is dependent on imports for a substantial part of their electricity from countries that generate the extra power with gas.
EU launches LNG benchmark
Finally, the European Union announced its target price for LNG on Monday, April 3. The EU hopes that the new benchmark will prevent sharp price increases if gas threatens to become scarce. The new price should form the basis for European LNG trade. It remains to be seen whether the benchmark will be used in practice. Companies in the sector express their preference to continue using the existing TTF LNG index. This should not be too surprising, as it is in the interest of the European Union to quote a price below market value. On the introduction day, the price of the new benchmark was €9,57 per megawatt hour below the TTF quotation.