The price of European natural gas has exceeded 100 euros per megawatt-hour for the first time since December 2022. The next-month delivery futures on the Dutch TTF hub, a key benchmark for the market in Europe, reached 100.37 euros per megawatt-hour at 16:00 CET on October 28. The increase for the day was more than 4%.
The rise followed a warning from EU Energy Commissioner Dan Jorgensen. “Again, due to geopolitical turbulence, Europe is facing a new energy crisis”, he told journalists in Brussels. He said the coming winter would be difficult for European citizens and the economy, and fuel bills in the European Union were “rising rapidly”.
Low stocks add pressure to the market
Gas storage in the European Union was 75% full as of October 21, according to data from the Agency for the Cooperation of Energy Regulators (ACER). This is below the usual target of 90% for November 1, with member states allowed to apply the target more flexibly. At the end of the previous winter, stocks were just 28%, compared with a nine-year average of around 40%.
Replenishing storage has been slow and expensive. ACER estimates that the war has increased Europe's gas import bill by between 18 billion and 33 billion euros. Additional pressure comes from the disruption of LNG supplies linked to the war with Iran. Almost no LNG from Qatar reached the European Union in the summer, increasing its dependence on supplies from the United States. The United States already provides about 30% of the bloc's gas.
Europe to compete with Asia for LNG
In the winter, the European Union will have to compete with Asian buyers for available LNG cargoes. According to ACER, this could lead to further sharp price fluctuations. The risk is partly limited by lower consumption: gas demand in Europe is around 20% below pre-crisis levels since 2022, allowing existing stocks to be used for longer.
The TTF price remains below the record high of around €340 per megawatt-hour reached in August 2022, but is well above the level of around €32 before the start of the war with Iran. The European Commission expects the global diesel market to remain tight until 2027 and wants to increase production at European refineries, around a quarter of which have closed in the past two decades.
As a possible alternative, the European Union and Canada are discussing a long-term agreement for the supply of liquefied natural gas. A meeting of energy ministers from member states is scheduled for Thursday, where the risks to winter supplies are expected to be discussed.
Sources: euronews.com, acer.europa.eu