Analysis Energy
Gas price remains at a high level
The gas market was relatively stable this week and remains at a relatively high level. Nervousness around Russian gas supply remained a key factor this week as well. Additionally, LNG remains expensive, but Europe is now the player driving prices up. Meanwhile, despite significant production from renewable sources, electricity remained quite expensive.
After several increases, the gas price stagnated this week. On Tuesday, November 26, gas was traded at €47.77 per megawatt-hour. By Monday, December 2, the gas price rose to €48.62. This was the peak of the week, but still within the previous range of November 2024.
The TTF remained roughly at the same level this week. The market is quite nervous about the delivery of Russian gas as Ukraine refuses to transport Russian gas beyond 2025. This week, a 3% reduction in supply added extra tension.
However, the tension around the rate at which gas reserves are being depleted has decreased. The rate at which the fill levels are decreasing is normalizing again. Until two weeks ago, the pace at which gas reserves were being consumed was clearly above average. Last week, the pace returned to roughly average. As a result, the fill level decreased this week from 87.9% on November 23 to 85.5% on November 30.
LNG price remains high
Meanwhile, the LNG price is also stabilizing at around $15 per MMbtu. This level is below the European gas price, making the European market attractive for LNG traders again. The U.S. Energy Information Administration (EIA) predicts that the LNG market will remain tight this year. So far, demand in both Asia and Europe seems to remain strong. The EIA expects U.S. supply to increase, but it may take a few months for exports to reach their peak.
Additionally, the EIA expects Mexico to open a new LNG terminal on the east coast. Finally, the agency foresees new overseas LNG projects in Senegal and Mauritania. However, Russia has halted exports from its Arctic-2 facility due to sanctions against the country.
Seasonal pattern reverses
European gas analysts also note that traders expect seasonal patterns in the gas market to reverse by about 180 degrees. This year, the gas price rose to a significantly higher level in the summer than in the winter, when demand is lowest. Analysts anticipate this pattern to return in the coming years. With Europe heavily relying on stocks and availability being tight, prices are highest in the injection season. In winter, when reserves are drawn upon, prices are lower.
Electricity price
The price of electricity is clearly higher than last week. At €124.78 per megawatt-hour, the peak on Friday, November 29, is significantly higher than the previous week. Additionally, the price dropped below €100 for only one day compared to three days the previous week. Finally, the price barely decreased over the weekend. While the price was €13.74 on Sunday, November 24, it dropped to €94.35 on Sunday, December 1.
A relatively small decrease in renewable energy generation was a key factor in the higher price level. In total, 41.6% of all energy was generated from renewable sources. Last week, it was 43.5%. Wind energy accounted for 34.7% of the electricity generated, while solar energy was responsible for 34.7%. This led to an increase in the share of gas-fired power plants from 30.4% to 32.7%.
A reason for the significantly higher electricity price is the less stable generation from renewable sources. Last week, wind energy provided almost a constant amount of renewable energy. This week, the amount fluctuated significantly throughout the days, resulting in clear peaks. Additionally, especially towards the end of the workweek, much electricity was generated at night when demand is lowest. This caused the electricity price to be relatively high during peak demand hours.
