Gas in Europe is cheaper than before the war in Ukraine, but…
ENERGIES – Good news for the portfolio? European wholesale natural gas prices fell to their lowest level since Russia’s invasion of Ukraine on Monday, Jan. 2, thanks to a mild winter that helped save supplies. However, analysts warn of market volatility for the coming months.
The reference price for natural gas in Europe is for one megawatt-hour (MWh) deliverable next month for the TTF contract on the Dutch market: on Monday, the price was hovering around €73, the lowest price since February 21, 2022. the wholesale price lost almost 50% in one month and mainly fell from the summer peaks: it reached 342 euros in August 2022.
Before the war in Ukraine, gas prices started to rise, but from February 24, 2022, they really exploded. Until then, the shutdown of several gas pipelines between Europe and Russia, its first customer, mechanically increased the price as less gas came into the country. the continent
Autumn is very soft and sober
Gazprom announced on Monday that Gazprom’s gas exports to the European Union and Switzerland will decrease by 55% in 2022. According to the calculations of Thierry Bros, an energy market analyst and lecturer at Sciences Po, the Russian giant supplied 62 billion cubic meters of gas to Europe in 2022, against 138 billion in 2021.
Why are prices falling today? First, because Europe filled its reserves to the brim last summer, then the autumn was very mild, and finally, households and businesses voluntarily reduced their consumption: Europeans burned very little gas in their boilers.
Therefore, inventories remain very comfortable for the beginning of the year and therefore there is less need to buy gas. On Monday, the filling rate of European gas reserves was 83.3%. According to Gas Infrastructure Europe, French reserves are 84% full, while German reserves are 90% full.
Good news affecting electricity
The price of gas affects electricity because many European power plants burn gas to generate electricity. French wholesale electricity prices for delivery in 2023 fell to 240 euros on Friday, the lowest since April, after surpassing 1,000 euros/MW in late August.
But these changes in wholesale prices are not reflected in prices charged directly to consumers because suppliers smooth out prices, especially during this period when prices can jump from one day to the next.
For the future, analysts remain very cautious. “Everything depends on what Vladimir Putin decides about the flow of gas to Europe” Mr Bros told AFP. “He could send less, but he could send more in certain directions, hoping to divide European countries among themselves, some academics test this + the Kremlin’s uncertainty principle + European unity”.
As an example, he points to the possibility of Russia exporting gas through a pipeline through Belarus, hoping to interest countries such as Italy or Germany. But “If Europe does not buy at least 30 billion cubic meters of Russian gas, it will be difficult to fill the storage this summer and prices are likely to rise” he said.
Uncertainties remain
Nevertheless, it is a continent “better made” compared to last year, he said. In January 2022, Europe’s gas reserves were only 54% full before the conflict began.
The same uncertainty on the industrial side. “If it’s cold at the end of January, prices will start to rise again”Nicolas de Warren, president of the association that brings together the most energy-consuming industries (chemical, pharmaceutical, steel, food, etc.) in France, warns.
It also fears competition for liquefied natural gas (LNG) cargoes between Europe and Asia, where prices are high. “Higher than European prices”.
To provide greater visibility for European industries in the future, “What will be discussed now is to return to long-term gas contracts with the exporting countries, Norway, Qatar, Nigeria, possibly Iraq.” notes.
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