Analysis Energy
Gas price drops due to lower demand for electricity
The gas price has dropped significantly this week. Last week, the European gas price was considerably higher than the LNG price. The developments in the electricity market were clearly divided into two phases. At the end of last week, prices were significantly lower than a week earlier.
The gas price has taken a clear step downwards. On Tuesday, September 3, the gas price was still €48.56, but by Monday, December 9, the price had dropped to €45.68.
The market is clearly starting to react to the lower supply and higher prices, which is turning the situation more positively and also reducing the price. According to credit rating agency S&P Global, LNG imports to the Mediterranean region reached the highest point in nine months in November. This is not entirely surprising. Due to lower temperatures and low renewable energy generation, gas stocks in that area decreased significantly. Import continues to rise significantly, reaching the highest level since January 2024 in the first week of December.
Due to strong supply, the LNG price remains stable. Prices in the Asian market are around $15 per MMbtu. This makes the Asian LNG price clearly more expensive than gas in Europe. Converted, the LNG price amounts to €48.71 per megawatt-hour. The fact that the price is not rising due to higher European demand is because of relatively low demand from China. Therefore, LNG destined for China is being resold to Europe.
Due to the increase in LNG imports, the difference between the current decline in the fill rate and the long-term average decline in the fill rate is smaller than three weeks ago, although the effects of colder weather are clearly visible in the market. On December 1, gas reserves were filled to 85.1%. By December 7, the fill rate was 2.3 percentage points lower, at 82.4%. However, it is still too early to speak of good news. Gas reserves are still being depleted faster than average.
Electricity price peaks significantly
The electricity price was high for two days last week, but later in the week, the price dropped significantly. A clear peak was seen on Wednesday, December 4. The electricity price reached €176.12 per megawatt-hour that day. This is the highest level since January 2023. The price then dropped significantly, reaching a low point on December 7, with electricity priced at €66.27.
This week, the amount of renewable energy generated increased significantly. The capacity of wind turbines was substantial. In total, 39.2% of electricity was generated by wind turbines. 5.1% of all electricity came from solar panels. This brings the share of renewable energy to 44.3%.
The generation of renewable energy was divided in two this week. Very little renewable energy was generated on Tuesday and Wednesday, causing electricity prices to be very high. In the following days, significant wind power led to a significant drop in electricity market prices. On Thursday and Friday, it was not uncommon for more than 8 gigawatts to be generated per ten minutes. On Saturday, the share of renewable energy was slightly lower. However, the lower industrial demand over the weekend resulted in noticeably lower prices.
