The price of gas has reached a new peak. Amsterdam’s TTF index reached 97.29 euros per megawatt hour, a level not seen since 2022. Brent, on the other hand, recorded a decline of 1.2%, closing at 115 dollars per barrel, while WTI recorded a decline of -1.85%, settling at 101.36 dollars per barrel.
The growing data, that of gas, therefore clashes with various realities: geopolitical uncertainty, the recomposition of stocks and the proximity to winter. It doesn’t help the transport situation through Hormuz, where a third of the methane exported to the West and East now passes towards Europe and Asia compared to the volumes before the start of the conflict.
Gas as in 2022: 97.29 euros per megawatt hour
On Monday 26 October, the price of gas on the TTF index in Amsterdam reached 97.29 euros per megawatt hour. This hasn’t happened since 2022, since the outbreak of the crisis between Russia and Ukraine. In the evening the price then dropped to 95.81 euros per megawatt hour, still an increase of 2.13% compared to the previous day and therefore still a rather high value. Surpassing $100 per megawatt hour could be just a matter of hours or days.
Analysts are wondering what is behind the current growth in gas prices and the reasons are now always the same, albeit with some new uncertainties. On the one hand, the delays in replenishing stocks, the fact that winter is actually approaching and then there are the geopolitical reasons, such as the uncertainties regarding new possible attacks on Iran by the United States.
In fact, the Strait of Hormuz continues to represent a physical and artificial bottleneck for the passage of gas and oil towards Europe and Asia. But even Qatar, one of the world’s largest sellers of LNG, is increasing imports of US liquid natural gas by reducing production.
How much US LNG costs: +12 billion
Since the war between Russia and Ukraine, Europe has started importing American LNG. A more expensive product than Russian gas and which was already weighing on the budget. Now with the crisis in the Middle East, the pressure to store gas is even higher.
Considering only the purchases of liquefied natural gas, especially American ones, the increase in European bills is around 12 billion euros. Billions more, despite a lower demand of 24 million tonnes purchased.
Why do we pay so much? The reason is related to the strong exposure to the spot market, where prices fluctuate every day. As the analysis explains Messengerto buy more LNG from the United States, Europe has been paying for eight months the prices of the day marked by the European TTF, which has reached 97 euros per megawatt hour, while in the United States people pay the equivalent of 8 euros per megawatt hour. Since the beginning of the war, European gas has more than tripled (+200% in the last year).
Europe is among the most exposed continents: it buys around 65% of its LNG on the spot market, while a quarter of its long-term contracts are linked to gas price indices. This is because it is incompatible with the green policy which aims to reduce the use of gas.
The level of storage
However, the situation is under control. Even if natural gas prices are high, the European winter could be warmer than average in recent years and this could reduce the need to purchase additional gas.
Filling at community level is below 75%, the lowest since 2009, but Italian storage facilities are almost full, at 90%.
On October 29th we could talk about measures to forcefully reduce gas consumption, however if the situation worsens. By “worsening” we mean temperatures that are lower than average and which would require more heating. In that case the European Union could find itself facing a gas shortage of 12-15% compared to demand. It’s the worst case scenario.
