Teplokassa – Newspaper Kommersant No. 189 (7390) of 10/12/2022
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The mild weather that settled in Europe in early October dropped gas prices from their August peaks to the level of early July, when the Nord Stream gas pipeline was still in operation. November futures for the TTF index fell to $1.5 thousand per 1 thousand cubic meters. In addition to warm weather, high underground storage inventories, weak demand for LNG in Asia and reduced consumption in European industry are keeping prices from rising, analysts say. However, with the onset of cold weather, price dynamics may change.
November futures on the Dutch TTF on October 11 reached the lowest values since the beginning of July at €155.5 per 1 MWh (or about $1.57 thousand per 1 thousand cubic meters). Gas futures reached their maximum value of €339 per 1 MWh at the end of August amid reduced supplies from Russia via Nord Stream and the need to fill storage facilities. However, in recent weeks, prices have almost halved, even despite the sabotage of the Nord Stream gas pipeline system. The spot price of gas for TTF with delivery “a day ahead” against the backdrop of warm weather in Europe fell to €102.05 per 1 MWh ($1.04 thousand per 1 thousand cubic meters).
Warm weather will continue to keep prices down. “Next week will be very mild, with southern Europe also sunny and above normal,” Refinitiv meteorologist Georg Müller told Reuters.
Europe continues to pump gas into underground storage facilities, but in most countries they are already filled, which reduces demand for gas.
As of October 9, the average level of reserves in European UGS facilities, according to AGSI+, was 91.17%. In the last month, the download rates have decreased, the increase as of October 9 was only 0.3 percentage points. In the coming weeks, the EU should move to the selection of gas from underground storage facilities.
The average productivity of terminals for receiving LNG in the EU, according to GIE, in October is about 61%. WPP generation covers about 17.8% of EU consumption.
The French EdF managed to restart the operation of five nuclear units, which increased the capacity of the country’s operating nuclear power plants by October 11 to almost 30 GW. It is assumed that by the beginning of January their capacity will already reach 50 GW due to the completion of repair work on the remaining units.
The main volume of pipeline gas to Europe now comes from Norway, large consumers in the EU agree on an increase in supplies from Algeria and Azerbaijan. Since the beginning of the military operation in Ukraine, Russia has reduced supplies through the Nord Stream gas pipeline and other routes, since the West has imposed numerous sanctions in response to Moscow’s actions in Ukraine. Deliveries through the Nord Stream gas pipeline completely stopped in September, and all chances for the restoration of pumping along this route this winter disappeared after sabotage on the Nord Stream and Nord Stream 2 gas pipelines. Now Russia supplies gas to the EU only through Ukraine in the amount of about 42 million cubic meters per day, as well as through one line of the Turkish Stream (about 45 million cubic meters per day, including supplies to Serbia).
Independent expert Alexander Sobko notes that gas prices in Europe traditionally also depend on spot prices in Asia, and now, against the backdrop of mild weather for this season, quotes there are 20% lower than in Europe.
“As a result, more and more LNG is coming to or going to Europe, which has an impact on prices, which in theory should tend to Asian ones, especially considering that for many LNG producers the transport distance to Europe is noticeably shorter than to Asia,” he notes.
Sergey Kondratiev from the Institute of Energy and Finance agrees that the main factor was the decline in LNG prices in East Asia (the JKM index is near the lows, in the region of $20 per MBTU), high UGS stocks in Europe and the continued decline in consumption in its industrial sector also influenced . However, he emphasizes that temperatures will play a key role in the coming months, and with a cold winter, we may see new highs in TTF prices.
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