Gas prices in the EU have updated the minimum of the second half of the year

Exchange gas prices in Europe fell to a minimum since the end of June 2022 – $909 per 1,000 cubic meters. m, according to the ICE exchange. January futures for gas at the TTF hub in the Netherlands reached this mark, or 83.9 euros per 1 MWh, at 15:08 Moscow time. At 15:19 Moscow time, prices were adjusted to 83.35 euros per 1 MWh, or $914 per 1,000 cubic meters. m.

Analysts say that the main reasons for the current decline in gas prices are significant gas reserves in European underground gas storages (UGS), as well as high wind energy generation. It is the wind farm factor that is believed to have become one of the reasons that launched the European energy crisis back in 2021. In particular, the fact that the fall in wind generation generation created an energy shortage in Europe, which led to an increase in electricity and gas prices.

After the start of the NWO in Ukraine and new anti-Russian sanctions in Europe, the energy crisis intensified. In March 2022, spot gas prices reached an all-time high, approaching $3,900 per 1,000 cubic meters. m. Then the quotes gradually declined, but in August they again switched to a sharp increase, although they could not beat the March record. In autumn, gas prices fluctuated in the range of $1,000-2,000 per 1,000 cubic meters. m.

On December 19, the countries of the European Union (EU) agreed on a gas price ceiling of 180 euros per 1 MWh, which corresponds to $1,975 per 1,000 cubic meters. m. As part of the European gas market correction mechanism, it will come into effect on February 15, 2023. The ceiling will be activated if the gas price at TTF (this is the most liquid gas hub in the EU) exceeds the agreed level, and the spread to the price of liquefied natural gas gas (LNG) in the EU will be more than 35 euros per 1 MWh. At the same time, the ceiling will not apply to OTC transactions.

Analysts then noted that setting the ceiling at about $ 2,000 per 1,000 cubic meters. m. is comfortable for the EU, as it will not lead to the redirection of LNG supplies to other markets, and will allow the EU to successfully compete for free gas volumes on the market. Against the backdrop of the EU decision, quotes accelerated their decline: the price fell from $1,225 per 1,000 cubic meters. m at 18:51 Moscow time and up to $1,190 per 1,000 cubic meters. m by the end of the trading session, that is, by 3%.

Analyst of FG Finam Sergey Kaufman notes that UGS facilities in Europe are now 83% full – more over the past ten years was only in 2019. According to Gas Infrastructure Europe as of December 21 and Vedomosti’s calculations, the volume of gas in European UGS facilities 89.8 bcm m

Igor Yushkov, a leading analyst at the National Energy Security Fund, recalls that due to warm weather in Europe, the heating season in the EU began later than usual – not in November, but in early December. Kaufman recalls that warm weather forecasts for January 2023 also affect quotes.

According to the expert, LNG supplies at an increased level and other factors also contribute to lower gas prices. Electricity generation from wind turbines in Europe, according to the association WindEurope, provided 19-27% of the EU energy mix this week after 10-21% last week. In addition, prices are being steadily pressured by the general decline in gas demand in the EU, adds Kaufman.

Yushkov suggests that the decision of the EU to introduce a ceiling on gas prices could also push prices down. “While the ceiling will only come into effect in February, market participants are wary of trading on the exchange and are trying to do more over-the-counter trading, and ICE futures are becoming less popular,” he says.

Kaufman notes that a steady decline in gas prices below $ 800 per 1000 cubic meters. unlikely. “This requires a combination of moderately warm winter weather, stable high performance from renewables and low competition in the LNG market,” he says. In the baseline scenario, Finam expects EU gas prices to remain above $1,000 per 1,000 cubic meters in 2023. m against the backdrop of a decrease in supplies from Russia and a recovery in demand for LNG in China. Yushkov also believes that gas prices in the EU in 2023 will stay above $1,000 per 1,000 cubic meters. m.