Status: 01/04/2023 1:54 p.m
Thanks to unusually mild winter temperatures, the European gas price has continued its downward slide of the past few days. For the first time since February 2022, the gas price has fallen below the 70 euro mark.
Wholesale gas prices in Europe have continued to fall. The TTF futures contract used as a reference on the energy exchange in the Netherlands was at times around EUR 67 per megawatt hour. This is the lowest price since February 2022 – i.e. before the start of the war in Ukraine.
The downward trend on the European gas market is thus continuing. On Monday, the gas price had already reached its lowest level since February 21, 2022 at EUR 72.75 per megawatt hour for deliveries in February. Since the beginning of December, the price of the TTF futures contract has roughly halved.
Mild temperatures cause gas prices to fall
The gas price had previously risen significantly from autumn 2021 and the beginning of the throttling of Russian gas supplies to Europe. With the start of the Russian war of aggression against the Ukraine on February 24, it then increased in leaps and bounds. On March 7, the TTF reached its previous high of 345 euros per megawatt hour. At the end of August, the price was almost as high, at just over 342 euros.
A key reason for the falling gas price remains the comparatively mild winter temperatures in Europe, which are dampening consumption. Thanks to the recent mild winter, natural gas is still being stored in Germany. According to the latest data from the European storage association GIE, the filling level in all German storage systems was 90.64 percent on January 2nd. Gas reserves are up for the 13th straight day after falling for several weeks.
Futures: Slightly rising gas prices ahead
However, a look at the futures prices for gas on the Intercontinental Exchange (ICE) futures exchange reveals that the prices are currently somewhat higher the further in the future the futures expiration date is. The price for the August contract is currently EUR 76.82 per megawatt hour. Such a pricing structure is known as “Contango”. It makes it clear that market participants expect gas costs to rise slightly in the future.
The most recent easing should not hide the fact that market participants are still expecting energy prices to remain very high by historical standards. For comparison: Between January 2016 and spring 2021, the TTF price was between around 5 and 25 euros per megawatt hour.