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. The fall is dramatic despite the fact that the war is going on at a very high intensity level and that there is no indication that this armed conflict could end in the near future.
Francis Perrin, Senior Fellow at the Policy Center for the New South (PCNS, Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris), told Trend Jan.9 that among the factors which explain this fall in gas prices since last summer the present mild weather in Europe is an important explanation.
“It means that Europeans have to consume less natural gas for heating purposes. But it is not the end of the story. The European Union (EU) and/or several EU countries have signed contracts with gas-exporting countries other than Russia. We had agreements between the EU and the U.S., between the EU and Egypt and Israel and between the EU and Azerbaijan for further gas deliveries to Europe in a short to mid-term horizon. The Baltic Pipe, which links Norway to Poland, is now operational. And there were bilateral gas agreements too: Algeria/Italy, Qatar/Germany, United Arab Emirates/Germany and Australia/Germany,” he explained.
Perrin went on to add that EU gas demand fell in the latest months of 2022, which is partly the result of energy-saving measures and partly the result of grave problems for several European industrial companies.
“The EU countries were able, despite a very difficult context, to fill their gas stocks almost at a 100 percent level before the beginning of the 2022-2023 winter. These various trends had a strong bearish impact on the gas markets,” noted the expert.
He believes that 2023 will be a difficult year economically speaking and many traders think that a world recession is nearing.
“In this scenario world gas consumption would fall, as in 2020, and prices would follow. It is now very likely that there will not be a gas shortage in Europe during this winter. Good news but it does not mean that the EU can be complacent about energy issues. The winter 2023-2024 will be a delicate period too and it is very important for the EU, the European member states, European companies and European populations to remain vigilant and to begin their preparations for the next winter as soon as possible. Presently the EU is receiving yet some Russian gas (80% less than at the beginning of 2022 as far as piped gas is concerned) but Russian gas exports will perhaps be completely stopped in 2023. Nothing is certain, of course, but it is crucial for European consumers to take this scenario into account. In this case it would be much more difficult than in 2022 to replenish gas stocks in 2023 before the next winter,” Perrin concluded.