The gas price is currently around pre-Ukraine war levels. That is a positive development, although there is a risk that the high Asian demand will push the price up. In addition, the low gas price and good returns from renewable sources ensure a low electricity price.
The gas price fell further, but increased slightly again on Monday, February 26. On Tuesday, February 20, gas traded for €24,17 per megawatt hour. On Friday, February 23, the European gas price reached the lowest point of the week, at €22,93. The TTF is now trading slightly higher again. On Monday, February 26, the price rose to €23,48.
Due to the sharp drop in recent weeks, the gas price is now at pre-war levels in Ukraine. The TTF is currently trading at approximately the same level as in May 2021. This appears to be a very favorable development, but the question is whether this level is sustainable.
The gas price has now reached a level where market analysts wonder whether the LNG market can still compete with the Asian market. Due to low European and Asian gas prices, the Asian spot price for LNG has fallen to the lowest level in three years. Compared to the beginning of the month, the price decreased by 30% to $8,30 per mmBtu. This is the lowest level since April 2021. According to analysts, prices are at such a low level that it could stimulate Asian demand.
Such tensions around the availability of LNG will probably remain for some time to come. In the long term, demand from Asia will only increase, Shell believes. In a recent report, the oil giant wrote that global LNG demand is likely to increase by 2040% by 50. Shell expects that most of this additional demand will come from China. The Asian country plans to switch a large part of its energy supply from coal to gas.
United States benefits
However, there are favorable long-term signals from the United States. In 2016, America exported only 1% of the world's LNG. That percentage will increase to 21% in 2023. As a result, the United States has become the largest supplier of LNG. In 2023, the United States exported as much as 67% of its LNG to the European Union. This is where the interests of the European Union and the United States converge. While the European Union needs gas, a lucrative new growth market has emerged for the United States for the young LNG market. Partly due to greater European demand, the American global share of LNG exports has increased by 2021 percentage points since 3. In 2021, the United States still exported 18% of all global LNG.
Electricity price drops accordingly
The electricity price was slightly lower for almost the entire week. On Tuesday, February 20, the EPEX reached €62,29 per megawatt hour. It is remarkable that the electricity price did not reach the lowest level of the week on Sunday, but on Friday, February 23. On that day, electricity traded for €43,98 per megawatt hour. On Monday, February 26, the EPEX reached its highest point of the week, at €66,18.
The lower gas price is a clear factor in the falling electricity price, although it appears not to be the most important factor this week. In addition to the low gas price, the share of gas in the electricity mix fell from 39,1% two weeks ago to 25,1% last week. The high supply of solar and wind energy resulted in low gas demand for power production. In total, no less than 45,6% of all electricity was generated by wind turbines. Add to this a 6,9% share of solar panels in the energy mix and the total percentage of virtually free energy amounts to 52,5%.
In addition, the high production from renewable sources clearly left its mark on the evolution of the electricity price. Peaks in the production of solar and wind energy resulted in the bottom price on Thursday 22 and Friday 23 February. On the other hand, the fact that the price was higher on Saturday and Sunday despite lower industrial demand is precisely the result of a low supply from renewable sources.