BAKU, Azerbaijan, Jan.9.On 6 January, at the end of the day, the price of the contract for gas delivery in February 2023 on the TTF market (Netherlands) was 69 euros per MWh. At the end of February last year, some days only after the beginning of the war in Ukraine, the price was 94.4 euros and, at the end of August 2022, it reached a peak of more than 340 euros.
Laurent Ruseckas, specialist on gas markets, gas midstream, politics and policy in Europe and Eurasia, S&P Global Commodity Insights, told Trend that it is not just the weather, which has driven the prices so low.
“I'd say there are three factors. Of course, the weather is a big one. There is a very mild weather so far this winter. The number two, is the impact of storage levels of Europe. Europe at great cost built its gas storage to 95 percent full by the middle of October. In a normal year, the shift from gas going into storage to gas coming out of storage on average is like October 22, or October 23. This year, it was November 14. So, Europe had this target of being 90 percent full by October 1, or whatever it was. And in fact, they were 95 percent full on November 14. So that has a huge impact on price, because everybody can see that there's no problem with supply at all,” noted the expert.
Ruseckas went on to add that when the price is set by traders, looking at a bunch of factors in the market, they look at supply, they look at demand, and they look at storage levels.
“And if storage levels in December are low and look pretty low, the price shoots up for later in the winter, because people realize that it's not going to be enough. Now the storage levels are high, the market gets very comfortable and it pulls the prices down. I mean, demand is still being met mostly by supply coming in every day,” he explained.
The expert believes that the third one is the demand crisis, as it really goes back to the fourth quarter of 2021.
“There has been a big impact on demand. The industrial, residential, commercial demand for gas is way down. It is not just because of the weather, but also because of people using less gas. So those are the three things that are all interacting with each other,” he added.