The gas price continues to fall. For the first time since the summer of 2021, the price on the TTF fell below €30 per megawatt hour. In addition to a good throughput of LNG imports, the sluggish economy is starting to push down the gas price. In addition, the G7 has announced that it will invest again in European gas infrastructure.
The gas price has fallen again this week by more than €2. On Wednesday, May 17, the gas price was at its highest point of the week, at €31,95. After that, the gas price dropped almost constantly until Tuesday, May 23. On that day, the gas price dropped to €29,36.
For the first time since the summer of 2021, the gas price has fallen below €30. As a result, some analysts conclude that the gas price is returning to what is often called its 'normal level'. By this, analysts are not referring to the pre-war level, but the level before the summer of 2021. During this period, the gas price already rose from €15-€20 per megawatt hour to approximately €40-€80.
In particular, the smooth flow of LNG imports ensures confidence in the market. Contrary to previous analyst expectations, Europe has still managed to import more than enough liquefied gas. Europe is benefiting from the weak growth of Chinese industry. As a result, gas intended for the Chinese market is still exported to Europe. In addition, analysts appear more optimistic about the growth of the LNG market in the United States. While experts initially had doubts about the growth capacity, production in the United States in particular appears to be expanding rapidly. Some analysts expect the US LNG market to grow by as much as 25% in the coming years.
Yet the lower gas price is not all good news. The lower rating of the TTF is directly related to an increasingly difficult economy. Meanwhile, gas demand no longer remains low due to high gas prices, but due to a sluggish economy. About 40% of all Dutch gas savings were achieved by Dutch industry and 12% of gas was saved by the agricultural sector, according to figures from ABN-AMRO. In other words, more than half of the savings are directly related to shrinking Dutch production. In practice, that percentage is even higher, because savings in electricity are not yet included in this calculation.
G7 reintroduces investment in gas
To maintain the current downward trajectory, the G7 has decided to invest heavily in gas infrastructure. The G7 previously decided to further phase out investments in fossil fuels due to the energy transition. But now that the European Union hardly receives gas from Russia, further investments in the gas supply are necessary, according to the G7 countries. In order not to endanger the energy transition, the countries have agreed to combine investments with further demand reduction and an acceleration of the transition to renewable energy.
The International Energy Agency has been warning since the winter of 2022 that insufficient LNG is currently being produced on an international scale to meet European gas demand in the long term. That is why the G7 seems to want to invest in the production and loading capacity of liquefied gas. Germany also indicates that it is investing in new gas-fired power stations to generate electricity. Construction is already being carried out in order to reduce gas consumption. Germany wants to build the new power stations in such a way that they can process green hydrogen in addition to gas.