European wholesale gas prices at lowest since Ukraine war began

AFP, published Monday, January 2, 2023 at 10:28 am

Almost five times cheaper than August: Europe’s wholesale price of natural gas fell to its lowest level since the start of the war in Ukraine on Monday, continuing its decline on the back of a relatively warm winter that is sparing inventories.

The benchmark contract for the continent, the TTF in the Dutch market, fell a further 4.67% to 72.75 euros per megawatt-hour (MWh) for February delivery around 09:35 (08:35 GMT) Monday morning, the lowest price since February 21st.

The price of gas for next-month delivery has lost almost 50% in one month… and has largely bounced back from summer highs: it peaked in August 2022 at €342 per megawatt hour.

Gas prices started to rise in autumn 2021, with the start of a reduction in Russian gas supplies to Europe, then very sharply after the invasion of Ukraine on February 24, 2022. Since then, almost all gas pipelines between Russia and Europe have shut down.

Volumes traded on Monday were weak as the main commodities market, London, was closed.

This downward trend was made possible by “large gas reserves that have been built up and subdued demand, thanks in particular to favorable climatic conditions,” explains Sebastian Paris Horvitz.

“This is good news for European states and for the economies of the region,” he said.

The price of gas affects electricity as many European power plants burn gas to produce electricity.

In France, the wholesale price of electricity for delivery in 2023, which had exceeded 1,000 euros/MWh at the end of August, fell to 240 euros on Friday, its lowest level since April.

However, these fluctuations in wholesale prices are not directly reflected in the prices charged to consumers as electricity suppliers smooth their tariffs, especially at this time when prices can increase from one day to the next.