After last week's drop of 22,5%, gas prices are cautiously continuing to fall. There is extra supply from Norway and due to the warm weather there is less demand than expected. Yet there is also a risk. Japanese Prime Minister Fumio Kishida has been spotted in Qatar to secure additional batches of LNG.
After the upward price pressure in June, the gas price is almost back to the level of the end of May. On July 12, the TTF recorded a reading of €26,64 per megawatt hour. The decline continued until Monday, July 17. At that time, gas was trading for €25,10.
The vigorous work on the Norwegian gas network in particular is pushing the gas price down. The Nyhamna gas facility started up as planned on Saturday, July 15, operator Shell announced. A major stroke of luck, because until recently the deadlines for various maintenance projects were postponed. This has major consequences for European import capacity, because no less than 25% of all Norwegian gas is transported through the facility. In addition, several smaller disruptions have been resolved. As a result of these developments, Norwegian supply was the highest since mid-April.
In addition, the extra demand due to the heat wave in Southern Europe appears to be driving up the gas price less than expected. In part, the windfall is the result of the increase in solar energy in Europe. Solar collectors are most productive during office hours and are able to absorb the majority of the extra demand. Because many houses in Southern Europe are traditionally built to keep heat out, office buildings in particular have air conditioning.
Japanese competition
The decline was broken on Tuesday, July 18. On that day, the price of the TTF rose slightly after it was announced that Japanese Prime Minister Fumio Kishida will visit Qatar to conclude new LNG contracts. According to Reuters, the visit follows persistent demands from the gas lobby to conclude new long-term contracts for LNG imports in the Arab country.
In 2021 and 2022, Japan chose to let several Qatari gas contracts expire. That turned out to be a risk strategy, because more and more Asian and European countries are concluding large contracts with the Arab country. To meet all these new contracts, Qatar must generate no less than 60% extra gas. There is considerable risk in this. If Japan succeeds in concluding futures contracts, this could have an impact on the European market. The European Union is still very dependent on the daily market to purchase gas. If Japan manages to contact gas for the long term, this could hit the international gas supply.