Gas prices fell for the sixth week in a row this week. LNG imports are still going well. The predicted competition from the Asian countries is still not forthcoming. Now that European gas supplies are going reasonably well, the G7 and the EU are considering further reducing Russian gas imports.
The gas price is currently only twice as high as it was before the summer of 2021. On Wednesday, May 10, the gas price was at the highest point of the week at €34,99. After that, the gas price fell by more than €2. On Wednesday, May 15, the price had fallen to the lowest point of the week and the price for a megawatt hour is €32,31.
The gas price has now fallen for the sixth week in a row. Until recently, the lower daily price had little influence on futures contracts, but this is slowly but surely starting to change. For the first time since January 2022, the 2023/24 winter contract is trading for less than €50 per megawatt hour. The price of the winter contract is currently €47,89. Although there is still a considerable gap between the winter contract and the current price, it appears that the market is slowly but surely gaining confidence in relatively favorable gas prices next winter. The fact that the market is calming down again is mainly the result of the large-scale import of LNG.
In April, European Union member states imported a record amount of LNG and to date, imports remain at a high level. Europe has now surpassed the Asian market as the largest importer of American liquefied gas. Due to the low demand from China, there is currently more than enough LNG available to meet current European gas consumption. Contrary to analyst expectations, Chinese demand for LNG declined in March due to industry weakness. As a result, the risk of shortages and extreme price increases appears low.
Analysts see only one scenario for a strong increase and that is a strong increase in the Asian industry in combination with a hot summer in Europe or Asia. In such a situation, a significant amount of additional LNG may be needed to meet the electricity demand of air conditioners.
Sanctions on Russian gas in the works
In addition, the European Union and the G7 have announced a new measure to further distance themselves from the Russian gas market. The EU and G7 plan to stop importing gas from pipelines that Moscow temporarily shut down in 2022, anonymous diplomats told the Fiinancial Times. In all likelihood, the decision will be ratified at the upcoming G7 summit in Hiroshima.
The decision is intended to prevent Russia from influencing the European gas price by turning the tap on and off. In 2022, Russia cut gas supplies several times to drive up prices on the TTF. In the summer, the European gas price was as much as €339. In addition, the European Union appears to want to increase confidence in the LNG infrastructure with the new policy. LNG suppliers in the United States are hesitant about investing in larger production capacity to meet demand in the European market. Investors are afraid that European countries will immediately resume large-scale imports from Russia as soon as the war in Ukraine is settled.