Analysis Energy
Gas price drops back below 50 euros
The gas price exceeded €50 this week, but then dropped back to the level of the beginning of the week. The reserves have not been consumed so quickly in seven years. Because there is no immediate shortage, the high consumption has little effect on the price. Meanwhile, the electricity market presents a diffuse picture.
The gas price rebounded this week after the sharp increase. On Thursday, January 2, the gas price peaked at €50.27 per megawatt-hour. By Tuesday, January 6, the price at the TTF had dropped to the lowest level of 2025. The gas price decreased by 4.2% to €48.17.
Weather remains the main short-term factor in the European gas market. At the beginning of January, temperatures are still on the high side, but that is likely to change soon. Considerably lower temperatures are expected in Northern Europe in the coming weeks. This led to prices above €50 last week. Prices have since dropped significantly now that the news has been processed and the realization has set in that shortages are unlikely this year.
Gas reserves declining rapidly
However, the colder weather than we have been accustomed to in recent years is causing the reserves to deplete much faster. Due to the cold weather in Northern Europe, gas reserves have depleted at the fastest rate in seven years. Since the end of the summer, gas reserves have decreased by over 25 percentage points, a situation not seen since 2018.
Yet, the significant decrease in gas reserves does not impact the gas price. The reserves are not depleting quickly enough to cause immediate shortages. However, this does not mean that the situation is without risks. If the reserves continue to deplete at this pace, it may prove more challenging than in previous years to (almost) fully replenish the reserves. This risk is far from averted. For now, gas reserves continue to decline more sharply than would be expected based on the long-term average.
LNG price continues to rise
Meanwhile, the LNG price increased slightly last week. The demand for LNG remains strong for this time of year due to the significant European gas demand. The fact that prices are somewhat contained is due to the increase in global supply. The United States, in particular, is increasingly bringing liquefied gas to the market. In December, the U.S. exported 4.5% more than in the same month of 2023. Total exports amounted to 8.5 million tons of LNG. The total export for the entire year reached 88.3 million tons, a 4.5% increase compared to the previous year. In 2023, exports amounted to 84.5 million tons.
Electricity price high, but drops significantly
Meanwhile, the electricity price fluctuated considerably this week. The electricity price was quite high in the first days of the new year. On the first day of the year, the electricity prices were quite low. Between Thursday, January 2, and Sunday, January 4, the price was above €100 per megawatt-hour. On Monday, January 6, the price dropped to €54.85.
Last week, a considerable amount of renewable energy was generated for this time of year. In total, 46.7% of all electricity was generated by solar and wind energy. Wind energy, in particular, dominated with a percentage of 43%. In practice, there were very strong winds on some days and calm winds on others. This led to significant peaks and valleys in the electricity market. The mild and sunny weather between January 2 and 4 caused a significant increase in electricity prices.
Due to the mild weather, little wind energy was generated, which was compensated for on Thursday, January 2, by increased efficiency of solar panels. This resulted in a significant peak in renewable energy generation. However, at this time of year, such a peak only temporarily lowers prices, as the number of sunny hours is low during this period. On Monday, January 6, a significant amount of wind energy was generated. In the morning, the capacity remained constant at around 10 gigawatts per 10 minutes, and in the afternoon, it dropped to around 7.7 gigawatts per 10 minutes. This put strong pressure on electricity prices.
