Gas in Europe is five times cheaper than in August

Gas in Europe is five times cheaper than in August

The wholesale price of natural gas in Europe has fallen to its lowest level since Russia invaded Ukraine. The reference – the Title Transfer Facility (TTF) – fluctuated around 73 euros on Monday, January 2; it’s down nearly 50% in a month and mostly bounced back from the summer highs – it peaked in August 2022 at $342.

Gas prices started to rise before the war in Ukraine, but from February 24, 2022 they really skyrocketed. The closure of several gas pipelines between Russia and Europe, until then their first customer, made them rise mechanically.

Gazprom’s gas exports to the European Union and Switzerland fell by 55% in 2022, the Russian company also announced on Monday. The company shipped 62 billion cubic meters to Europe in 2022, compared to 138 billion in 2021, according to an estimate by Thierry Bros, an energy market analyst and teacher at Sciences Po.

Why are prices falling today?

Prices are falling because Europe filled its reserves to the brim in the summer of 2022; then, because the autumn was very mild; Finally, because households and companies have voluntarily reduced their consumption.

So less gas has to be bought. On Monday, too, the filling rate of European gas reserves was 83.3%; According to Gas Infrastructure Europe, they are 84% full in France and 90% in Germany.

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The price of gas is reflected in the price of electricity, as many European power plants burn gas to generate electricity. In France, the wholesale price of electricity for delivery in 2023, which had exceeded 1,000 euros per megawatt-hour at the end of August 2022, fell to 240 euros on Friday, its lowest level since April 2022.

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

Analysts remain very cautious

However, analysts warn of the unpredictability of the market in the coming months. “It all depends on what [le président russe] Vladimir Putin will decide on gas supplies to Europe,” Mr. Bros. told Agence France-Presse. “He could send less, but he could also send more [à certains] hoping to divide up the European countries among themselves. Scientists call this the “Kremlin uncertainty principle”, which puts European unity to the test. »

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As an example, he cites the possibility for Russia to export gas via a gas pipeline through Belarus, hoping for interesting countries like Italy or Germany.

“If Europe does not receive at least 30 billion cubic meters of Russian gas, it will be difficult to fill storage facilities this summer and prices are likely to rise,” the analyst also warns. Still, the continent is “better prepared” than last year, says Mr. Bros. In January 2022, before the conflict erupted in Ukraine, Europe’s gas reserves were only 54% full.

The same uncertainty on the industrial side. “If there is a cold spell at the end of January, prices will go up again,” warns Nicolas de Warren, president of Uniden, which brings together France’s most energy-intensive industries (chemical, pharmaceutical, steel, food industry, etc.). He also fears competition for liquefied natural gas (LNG) cargoes between Europe and Asia, where the prices being asked “are now higher than European prices”.

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In order to ensure more visibility for European industry, “what is being negotiated now is a return to long-term gas contracts with exporting countries, Norway, Qatar, Nigeria and possibly Iraq,” he points out.

The world with AFP