Market Overview

27 September 2022

Gas Prices in Europe are Less Vulnerable to Russia’s Actions Now

Gas prices in Europe are less affected by the levels of gas reserves as gas storage facilities are 87.4% full as of September 24. The summer heat and drought have passed after the rainy season has arrived across European countries. Nevertheless, gas reserves were planned to be increased to 90-95% to enable Europe to securely see the cold winter season through. All these factors have pulled gas prices down from August peaks of €349.90 per MWh for November Dutch TTF Gas Futures.

More importantly, gas prices are now reacting on monetary tightening of the Federal Reserve (Fed) and other large central banks, which are uncompromisingly combating blistering inflation and likely pushing economies closer to a recession. This leads to the further strengthening of the Greenback. The U.S. Dollar index (DXY) rose to 114 points from 108 points on September 21, when the Fed decided to raise interest rates to 3.25%. A rising Dollar and risks of falling demand by sliding leading economies are pulling prices down. 

November Dutch TTF Gas Futures prices continue to slide from €205.31 per MWh on October 21 to €192.79 on September 26, or by 8.6%. However, on Tuesday, September 27 prices jumped by almost 10% to €211.60 after technical damage of all three pipelines of both North Stream 1 and North Stream 2 were spotted. That may stop any gas supplies from Russia being distributed for an indefinite period, which may last for months. Many believe that this could be a sabotage operation conducted by Russia since the country is no longer a reliable partner for Europe. So, this accident may cease gas imports and require more LNG imports. It is hard to imagine the real consequences of this as the only functioning North Stream 1 was pumping gas at 20% of its capacity, while Europe was preparing for a complete shutdown of gas supplies from Russian during this winter season.

As part of the European plan many interstate gas pipelines were constructed and more LNG platforms were put into operation. The Baltic Pipe, which pumps gas from Norway to Poland, is scheduled to be operational at full capacity on October 1. Nuclear and coal power plants are being reset to run at full capacity, while green energy power sources are being facilitated to be introduced ahead of schedule. Harsh measures of energy distribution to cut the consumption by 15% could also be introduced.

Nonetheless, the situation is tense ahead of the winter heating season, and could get worse if it is a very cold winter. 


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.


Mark Goichmann
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.94% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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