After the sharp fall in prices in response to the suspected attack on the pipelines of Nordstream 1 and 2, the market resumed its downward trend. This fall in prices is mainly the result of mild autumn weather and successful energy policies of both the European Union and the Member States. However, according to the International Energy Agency, large price increases are still far from out of the question.
The market currently only has one direction and that is down. The TTF reached its highest point on September 30 at a level of €203,50. At the time this article was written (October 5), the value was at its lowest, with a value of €156,50. This is the lowest level since early July. The gas price is currently approximately 50% lower than on the record day of August 26, 2022.
The warm start to autumn is one of the causes of the falling prices. But the influence of political decisions should not be underestimated, according to analysts. On Friday September 30, the European Commission took a new step to control energy prices. The new plans mainly focus on the electricity market, but the solidarity contribution from the fossil sector is also taking shape. According to the commission, member states have agreed to levy extra taxes if companies' profits are 20% higher than a year earlier.
The development of the support measures is also progressing steadily in The Hague. The measures for small and medium-sized businesses have now been announced. Due to strict European rules against granting state aid, it will take some time before compensation can actually take place. The government expects that small entrepreneurs who use a lot of energy can count on help from the beginning of 2023. Just like for consumers, a temporary solution is currently being sought that could come into effect as early as December. It is not yet known how the measures will take shape.
In addition, the final price ceilings for consumers were announced on Tuesday, November 4. A household will soon pay €1.200 for the first 1,45 cubic meters of gas. The rates apply from January 2023. In November and December, households will receive compensation of €190. Because these rates are too low for suppliers to purchase energy, they receive a subsidy. The cost of the package is estimated at €23.5 billion.
Instability
The major national media view the current developments positively, but analysts warn to beware of excessive optimism. Gas prices remain much higher than usual and large price increases cannot be ruled out. The International Energy Agency (IAE) also warns of possible setbacks in their recent quarterly report. According to this organization, savings are crucial to get through the winter. Due to the announced price ceiling, it remains to be seen whether the cuts will continue.
Due to high prices, there is currently a gas saving of 10% compared to 2021. The industry even uses 15% less gas than a year earlier. European gas reserves are currently well filled. But this provides few guarantees for the long term, the IAE warns. Because fully stocked stocks only provide 22,5% of the European Union's gas needs. If savings are disappointing, disruptions in the European gas supply cannot be ruled out, writes the International Energy Agency.
Finally, the IAE expects stiff competition on the LNG market. LNG is becoming increasingly important in the European gas supply, resulting in an increase in international exports of 60 billion cubic meters of liquefied gas. Especially if there is a cold winter in Asian countries, the price of liquefied gas can rise sharply. In this region, LNG traditionally plays a major role in the gas supply.