The gas and electricity markets moved in opposite directions this week. Due to low consumption around Christmas, the electricity market entered a kind of pause mode. In the meantime, the gas market is rising slightly again because sailing to the Asian market is attractive for American LNG ships.
Compared to a week ago, the gas price is slightly higher, but compared to the autumn the price is lower. On Wednesday, December 20, gas was traded for €33.52 per megawatt hour. A week later (on December 27), the gas price rose to €36,05.
Favorable weather put pressure on gas prices in the run-up to Christmas. The days before Christmas were wet with relatively mild temperatures. A similar weather pattern is expected to continue into the start of the new year. Due to the warm weather, European gas reserves are still very well filled. The European Union's filling rate is currently 87,1%. At 83%, Dutch gas reserves are below the European average. On the other hand, German reserves are still above 90%.
According to market analysts, the recent increase is the result of the attacks in the Red Sea. Several Qatari LNG tankers bound for Europe have indicated that they no longer want to sail through the Red Sea. Analysts estimate that by 2023, about 4% to 8% of global LNG would be transported through the Red Sea. According to analysts, circumnavigation via the Cape of Good Hope could easily take 22 days longer for LNG ships. This is almost 145% longer than normal. The longer sailing time, in combination with a low European LNG price, puts pressure on the market.
The Asian LNG price that constantly rivals the European one fell to $11,90 per mmBtu. The European price is still well below that. According to data agency Spark Commodities, the price for European LNG is as low as $10.206 per mmBtu. The low price makes it more attractive for American LNG ships to sail to Asia. As a result, the market is anticipating lower European imports.
Electricity prices drop during Christmas
Meanwhile, the electricity market is in holiday mode. On Thursday, December 20, electricity traded for €72,42 per megawatt hour. On Thursday, December 24, the price on the Epex fell to €3,33. On Wednesday, December 27, the electricity price is still on the low side, at a quotation of €63,96.
The main reason for the low price is the lower demand for electricity. Between Christmas and New Year's Eve, the industry shifts down a few gears, causing the electricity price to drop considerably. Production reaches its lowest point around Christmas. This is mainly why the price fell even more sharply around Christmas.
Strong winds also cause a significant drop in electricity prices. Around Christmas the wind was consistently strong with peaks of wind force five and strong gusts of wind caused significant peaks in production throughout the period. However, because the peaks spread fairly evenly across the country, the entire wind energy production was fairly constant. Together with the low consumption, the share of wind energy amounted to 53,7%. In addition, approximately 2,8% of solar energy was produced, bringing the share of free electricity to 56.5%.