Analysis Energy
Dropping gas prices nipped in the bud
The price of gas dropped earlier this week, but quickly turned around. In particular, the news that the deal between Azerbaijan and Ukraine is not going through is causing higher prices. Meanwhile, the electricity price remains fairly stable.
The price of gas has been largely corrected after a decline. On Tuesday, September 17, gas was traded at €35.55 per megawatt-hour. On Thursday, September 19, the gas price dropped to €33.08. On Monday, September 23, the price rose again to €35.25.
An important reason for the declining gas price earlier last week was the pressure that arose in the market after rumors spread that Ukraine had reached a deal with Azerbaijan. It was about gas deliveries to the European Union after an existing five-year contract with Russia to transport gas to the EU through that country expires. Due to the war, Ukraine is not willing to extend the deal. This is the last pipeline that transports gas from Russia to the European Union. However, on Thursday, September 19, it turned out that the earlier reports were inaccurate. A source from the Azerbaijani Ministry of Energy stated that not only was there no deal on the table, but there were also no meaningful negotiations taking place.
In addition, colder weather is expected later this month. According to some analysts, European consumption could increase to about 8 million cubic meters per day. Meanwhile, the situation in the LNG market remains tense. Analysts indicate that it is completely unclear which direction the LNG market will take this winter. A downward trend is clearly visible in the Asian market, although prices are still high. On Thursday, September 19, the price reached its lowest point since early August. LNG was traded at €12.83 per MMBtu that day. This puts the LNG price roughly at the level of the rest of the summer, but still significantly higher than last winter.
Norwegian supply recovers
On the other hand, it turned out that the supply from Norway was less disrupted than expected. In the middle of the week, the supply from the country reached its lowest point in seven weeks. The supply decreased from 235.3 million cubic meters per day to 166.8 million cubic meters in the middle of the week. The disruption turned out to be very short-lived in practice. On Thursday, September 19, the supply increased again to 219.7 million cubic meters per day.
Stable electricity price
Meanwhile, the electricity price remains fairly stable, except for the listing on Monday, September 23. Last week, the electricity price remained constant between €80.97 and €69.50 per megawatt-hour. However, on Monday, September 23, the price increased significantly to €113.38.
This week, the tone in the electricity market was largely set by the production from renewable sources once again. The pattern of generation from renewable sources was approximately the same as in recent weeks. During the week, the significant generation of solar power and wind energy coincided, leading to a significant drop in prices. Like in previous weeks, the summer weather caused a decrease in wind energy generation over the weekend, keeping prices from dropping significantly despite much lower industrial demand.
Monday seems to be very similar to last week. Just like last week, it is calm but sunny. This results in relatively low prices during office hours. However, there is a difference. This week, high electricity prices in Germany and Denmark are pushing up Dutch electricity prices, as the Netherlands exports significant amounts of electricity to those countries. This is particularly noticeable early in the evening when demand is higher as many people return home and turn on appliances. Meanwhile, solar power supply decreases. As a result, the demand for gas to generate electricity increases significantly.
