Analysis Insights
Asian LNG price drives up gas price
The gas price has risen this week due to a higher price of LNG. The electricity price also increased. Just as the gas price is on the rise, the share of the fuel in the energy mix increased.
The gas market has taken a step up again after three weeks of relative stability. On Tuesday, July 23, the gas price was €31.62 per megawatt-hour. By Monday, July 29, the price had risen to €33.60, the highest point in a month.
The increase in the gas price is due to concerns about a relatively low supply. The uncertainty of the European supply is evident from the volatility of the gas price whenever minor disruptions occur. Part of the higher price is attributed to a warning from analysts at Energy Aspect Ltd that new disruptions to the Norwegian gas network are imminent.
LNG price on the rise
Furthermore, a higher LNG price is driving up the gas price. Due to warm weather, the demand for LNG from Asian countries is higher this year than in previous years, leading to rising LNG prices. Since the liquefied gas market is a global market, this also drives up import prices in Europe. However, at the end of last month, the price of LNG started to decrease. On June 25, LNG was traded for $12.74 per Mmbtu. Around July 22, the price stabilized at $12.10 per Mmbtu, but now the price is on the rise again. On July 29, the Asian LNG price increased to $12.45 per Mmbtu.
The price is being driven up by a disruption at an upload facility of the Australian Ichthys LNG. Market expectations are that the disruption will last for a while, putting global supply under pressure. The disruption has little direct impact on the European market, as Australia mainly supplies to Asian markets. However, it indirectly affects European gas supply. With the lower supply driving up the Asian LNG price, it becomes more attractive for American LNG ships to change course. As a result, the European market has to increase prices to compete with Asian prices.
Electricity price
Similar to last week, the electricity market remained stable but relatively high. On Tuesday, July 23, electricity was traded for €76 per megawatt-hour. The price fluctuated, reaching its peak on Friday, July 26. That day, electricity was traded for €88.47. The price decreased over the weekend, reaching its lowest point on Sunday, July 28, at €42.89. On Monday, July 29, the price was on the lower side, at €69.15.
Solar energy was once again dominant, while wind energy production lagged behind. In total, 34.7% of all electricity was generated by solar collectors. In contrast, the percentage of wind energy was 16.2%. Since the sun shines mainly during working hours but does not constantly affect prices, the generation of renewable sources in such a pattern leads to relatively low electricity prices during the workday, while electricity is generally relatively expensive.
Higher gas consumption
Furthermore, lower generation from renewable sources led to a higher electricity price. Last week, 62.8% of all electricity was generated from solar and wind energy. This week, that percentage decreased to 50.9%. In particular, solar energy generation decreased significantly. The share of renewable sources decreased by 9.2 percentage points in total. Additionally, the generation of renewable energy decreased by 2.5%.
Gas consumption was considerably higher last week than the week before. Last week, 34.7% of all electricity was generated from gas. The previous week, it was only 26.2%. This clearly had an impact on the market, especially since the gas price also increased. Overall, the average daily electricity price increased from €60.09 to €72.46.
