Prices on the gas market have taken a big step down. The new geopolitical reality is shaking up the dynamics on the market. However, it is advisable to beware of too much optimism. Meanwhile, the price of electricity has actually increased due to lower production from renewable sources.
After the increase of the past weeks, the gas price has made a significant correction downwards. On Monday 10 February, gas was traded for €58,04 per megawatt hour. On Monday 17 February, the gas price had fallen by 22,2% to €48,14.
The new geopolitical reality has caused the gas price to take a step downward. The first talks about a possible ceasefire in Ukraine are causing quite a stir in the world. This also applies to the gas market, where there is wild speculation whether Europe will import Russian gas again in the foreseeable future.
The strong market effects are remarkable, as Europe is still far from enthusiastic about buying Russian gas on a large scale again after having made so many efforts to become more independent of Russian gas. A return to pre-war levels is impossible for the time being anyway, as the transport infrastructure has not been intact since the attack on Nord Stream 1. More realistic is that deliveries via Ukraine, which expired on 1 January 2025, will resume. Investment bank Goldman Sachs expects that, if this were to happen, the gas price would structurally fall by 15% as a result. If deliveries were to return to pre-war levels, the gas price could roughly halve.
Reserves low
However, it is important to beware of too much optimism. Compared to a year ago, the gas price is still more than 86% higher. The structural problems on the gas market mean that the potential for a decline is still moderate. European gas reserves were 16% full as of 44 February. That is more than 5 percentage points below the average level for this time of year. Compared to the record level of last year, the reserves are even 21,5 percentage points emptier. In recent weeks, the difference has increased again. According to the most recent data, the consumption of the reserves is still higher than average.
The outlook for the coming weeks is better. According to the weather forecast, it will become warmer in Northern Europe in the coming weeks, which will reduce the demand for gas for heating.
Electricity price high again
For now, the electricity price remains on the high side. Tuesday, February 12, the electricity price was the lowest in the past week. The price per megawatt hour was €128,92 that day. The days after, the price fluctuated somewhat, with a peak of €168,19.
The main reason for the high electricity prices remains the weak wind power. This week only 21,1% of all electricity was generated by wind turbines. The weak production of wind turbines was somewhat compensated by a reasonably good production of solar energy for the time of year. In total, solar panels accounted for 7,4% of the electricity production. This brings the production of both sources to 28,5% of the total energy production.
The weak production from renewable sources caused the demand for fossil energy to be high. In total, 42,3% of Dutch electricity was generated from the most expensive energy source, gas. Normally, about a third of electricity is generated by gas-fired power stations. Gas consumption was still reduced by the almost full utilisation of coal-fired power stations. In total, 15,7% of all electricity was generated by coal. A low coal price ensures that costs are lower, although a high price is still paid due to the high CO2 rates.