Gas prices have fallen slightly again this week. Contrary to analysts' previous expectations, a bottom for the gas price still does not seem to be in sight. At the moment everything points in the direction of a low gas price, although analysts warn against too much optimism. It is not yet certain that the situation will remain so favorable.
The price of gas is currently falling at a snail's pace. On Wednesday, May 3, gas traded for €36,78. A day later (on Thursday, May 4), the TTF was at the lowest point of the week, at €35,65. For a moment the price seemed to correct again to €36,87. But on Tuesday, May 9, the gas price fell further to €36,32.
In recent months, analysts have predicted several times that the TTF listing would have bottomed out. Experts generally believed that gas prices would rise again around the start of the filling season. Contrary to analysts' previous expectations, the gas price is still falling. Between March 30 (following a sharp price spike that lasted only four days) and May 1, gas prices fell by 11%.
LNG imports are high
The prediction that gas prices would rise was based on the assumption that it would be difficult for the European Union to replace the lost Russian gas. Analysts pointed out that in 2022 Europe was dependent on LNG imports that China resold. Now that the Chinese economy is completely closed again, the purchase of LNG that China has contracted for a long time would no longer be possible. Despite the gas reserves being more than 50% full, it would therefore be difficult to return to a filling level close to 100% next winter.
Energy market analysts now appear to be backtracking on their earlier prediction. European LNG imports are much higher than expected. In April, France, Belgium and the Netherlands even imported a record amount of 10,6 million tons of liquefied gas. Larger imports from the United States in particular are the reason for the increase. About half of all European LNG comes from America.
Low Chinese demand helps EU
Another reason for the large LNG supply is the weak performance of the Chinese industry. Although the Chinese economy is on track to grow by 5%, Chinese industry grew by only 3%. Competition with other Asian countries is also lower than predicted due to high filling rates of Japanese and South Korean gas reserves.
The higher availability of liquefied gas puts pressure on the LNG price worldwide. “If Chinese demand does not increase and technical problems do not arise at major terminals, the LNG price could fall below €40 per megawatt hour,” energy consultant James Waddell told Bloomberg.
However, it is important to guard against over-optimism. Relatively minor disruptions to the gas supply can still lead to panic on the market.