Gas prices are looking for new limits – Newspaper Kommersant No. 156 (7357) of 08.26.

Gas prices in Europe continue to grow rapidly, being on the verge of setting a new historical record and approaching $3,500 per 1,000 cubic meters. However, as storage in Europe fills up quickly and demand for gas in the industry declines, there are more and more questions as to whether such a rise in prices is now fundamentally justified. Now gas in Europe in terms of energy equivalent is five times more expensive than oil.

Gas prices in Europe continue to consistently go to new record levels. The September futures for the TTF index on the ICE exchange during trading on August 25 reached €323.9 per 1 MW•h (about $3480 per 1 thousand cubic meters) – this is only 6.5% less than the absolute historical maximum reached during the auction on March 7 (€345 per 1 MWh). By evening, the price corrected slightly, and at 21:00 Moscow time the futures traded at €310.5 per 1 MWh (up 6.3% versus the previous trading day). The spot price for gas with delivery on the “day ahead” amounted to €311.5 per 1 MWh.

Since mid-August, when an unscheduled shutdown for repairs of the Nord Stream gas pipeline was announced for three days at the end of the month, gas prices in Europe have already added 30%. Additional price growth factors are the ongoing heat and drought, which increases the demand for electricity from gas-fired thermal power plants. In addition, the strict requirements of the EU authorities to fill storage facilities by winter are forcing European gas companies to buy gas and pump it into underground gas storage facilities even at current prices.

The immediate reason for the current rise in prices were reports by EdF that it would delay the restart of four nuclear reactors that were found to have corrosion problems in May.

In addition, market participants are evaluating the potential effect on gas supplies from Norway in September, when a number of fields, including large ones such as Oseberg, Sleipner, Gullfaks and Gina Krog, will be shut down for preventive maintenance.

However, analysts and market participants are increasingly questioning the extent to which the current rally is fundamentally justified, given the apparent drop in demand for gas from the European industry. “I’m a little worried about current gas prices. In oil terms, they are $ 500-600 per barrel – this is not an indicator of sustainability, there is a risk of a reversal,” Øystein Bergsvik, vice president of commerce and investment at Norway’s Equinor, told Reuters on August 25.

As Kommersant wrote on August 23, European gas market participants were expecting some relief towards the end of the month as temperatures drop and most of the major EU countries approach their designated 80% storage capacity target. “Until European gas storage is full, demand for gas for injection will support prices, as will demand from power generation, which remains robust,” Engie EnergyScan analysts wrote in their report. According to them, until then, only “a sharp change in fundamentals can change the bullish market sentiment.”

At the moment, European storage facilities are already 78% full, while the European Commission has set the goal of filling up to 80% by October 1. By this date, European UGS facilities will be filled by more than 90% at the current rate.

Yuri Barsukov