The new data after the agreement on the ceiling on natural gas
The agreement at the meeting of EU energy ministers to impose a cap on natural gas last Monday was accompanied by a significant drop in prices in the coming days of the week.
The European reference price for January delivery on the Amsterdam market (TTF) fell from €134 last Thursday, December 15, to €85 on Friday, December 23.
For six consecutive days, prices fell, registering a total decrease of almost 50 euros or 37%, while the decrease amounted to 26% on a weekly basis. At current levels, the price of natural gas is 95 euros less than the limit of 180 euros agreed in Brussels.
Although the reduction in prices in the previous period is attributed by market players to a confluence of factors, such as:
• the increase in supply due to imports – record liquefied natural gas (LNG) and large wind energy production in Germany;
• subdued demand due to unseasonably high temperatures in Northern Europe this week and
• the high level of gas storage tanks,
the limit created a sense of security in the markets that the extreme high prices of August and September will not be seen again. In this two month period, prices were higher than 180 euros for a total of 40 days, with dire consequences
In order to activate the limit, the price of the TTF reference index must be higher than 180 euros for three days and, on the other hand, exceed the price of the contracts for the supply of LNG with 35 euros during the same period. The second condition has been established to ensure that Europe can attract LNG cargo and thus meet the concerns expressed by Germany and other countries.
The limit will be valid for 20 days, but it will also be possible to suspend it if there are risks to ensure the necessary supplies.
The European Commission will be able to decide on its suspension, if the conditions are met, such as
• the demand for gas increases by 15% in one month or by 10% in two months,
• LNG imports are significantly reduced or
• the volume of transactions in the Amsterdam Stock Exchange has decreased significantly compared to the corresponding period of last year.
Returning to the reasons that pushed prices down this week, it should be noted that the German wind generation is expected to average more than 30 GW next week, or about 50% ‘ above normal levels, according to Norwegian energy information company Montel.
Above all, however, it is worth noting that LNG imports set a new weekly record and were above 4.4 billion. cubic meters of last week, while December is expected to record a monthly record, with imports exceeding 18 billion. cubic meters.
In addition, gas storage capacity in Europe was last at 83%, just below last week’s 85% but well above 57% a year ago.
Russia resumes natural gas deliveries
At the same time, Moscow is ready to resume deliveries of natural gas to Europe through the Yamal pipeline, according to the statements of Russian Deputy Prime Minister Alexander Novak to the TASS news agency.
“The European market remains in the news as the shortage of natural gas continues and we have the opportunity to resume deliveries,” he said, mentioning in particular the Yamal pipeline whose operation his “was stopped for political reasons and is not yet used.”
The flow of the pipeline to the West was reversed from December 2021, as Poland refused to buy gas from Russia and turned to reserves held in Germany.
The epilogue to the contract between Poland and Russia was written in May, after Warsaw earlier rejected Moscow’s request to pay in rubles.
Russian energy giant Gazprom cut supplies, saying it could not export natural gas from Poland after Moscow imposed sanctions on the company that runs the Polish section of the Yamal pipeline.
The Russian Deputy Prime Minister also said that Moscow is considering deliveries of larger quantities of natural gas through Turkey, following the creation of an energy hub there.
Referring to liquefied natural gas (LNG) deliveries, Novak said Moscow estimates it has supplied Europe with 21 billion cubic meters (bcm) in 2022. “This year we managed to significantly increase LNG deliveries to Europe,” he said and clarified that until the end of November they were estimated at 19.4 bcm, while until New Year’s it is estimated which will rise to 21 bcm.
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