Analysis Energy
Gas price drops almost to 40 euro mark
The gas price has once again dropped significantly this week. Warmer weather is expected next week, which is welcome news. The reserves are being depleted much faster than last year. Meanwhile, the electricity price has spiked enormously due to a combination of high demand and low supply from renewable sources.
The gas price has further decreased this week. Gas was traded at €45.55 per megawatt-hour on Tuesday, December 10. By Monday, December 16, the price had dropped to €40.32. The decline over a two-week period is substantial. Since Tuesday, December 3, the gas price has fallen by 16.97%.
An important factor contributing to the decrease in gas prices is the mild temperature expected next week. Until December 23, relatively warm weather is forecasted in Northwestern Europe. Market expectations are that heating demand will be lower in the coming weeks than is normally the case for this time of year. This significantly impacts prices, as the lower consumption is timely.
Last week, the amount of gas withdrawn from reserves approached the average, but later in the week, consumption increased significantly again. Last week, 45.8 gigawatts were withdrawn from reserves. The long-term average indicates that reserves decrease by 32.9 gigawatts during this period. This means that 39.3% more gas has been withdrawn from stocks than the average. As a result, the gas reserve level has dropped to 78.8%. This is approximately equal to the long-term average, while the reserve level for this week was clearly above the long-term average. During the period when the reserve level is typically at its peak, the reserve level was roughly 5 percentage points higher than the average.
Refilling the reserves remains expensive. Due to significant demand from the European Union, the leading Asian LNG price has remained quite high despite weak Chinese demand. Currently, liquefied gas is being traded for less than $15 per MMbtu. However, at $14.89, the price is only 24 cents lower than the peak on December 2.
Electricity price spikes significantly
The electricity price experienced extremes this week. Partly due to a record price between 5:00 and 6:00 am, the electricity price reached its highest point since December 2022 on Thursday, December 12. Electricity was traded at €355.58 per megawatt-hour that day. On Monday, December 16, the price hit the lowest point of the week. The electricity price was exceptionally low at €59.55.
Throughout the entire autumn, the electricity market has been below seasonal norms, and this was evident on the electricity markets. This week was no exception. Wind turbines generated 30.3% of all electricity this week. Additionally, solar panel output was weak. Due to the overcast weather, only 2.4% of all electricity was generated by solar panels. The total renewable energy output remains just below a third at 32.7%. This resulted in a significant use of fossil fuels. In total, 35.8% of all electricity was generated by natural gas. Furthermore, coal-fired power plants were heavily utilized, with coal power accounting for 15.7% of the total electricity generation.
This was also the main cause of the record price on Thursday. Between 5:00 and 6:00 am, the electricity market recorded a record price. The price per megawatt-hour reached €1,200 that hour. Electricity remained expensive throughout the day due to the overcast and windless weather, resulting in minimal electricity production from wind turbines and solar panels. Additionally, a significant amount of electricity was exported to Germany, increasing demand beyond the usual levels.
