The price of gas at the Dutch TTF hub has fallen almost continuously since last week, with a short-lived reversal on January 5, when natural gas prices in Europe rose on concerns that LNG shipments could be diverted to Asia.
The relatively warm weather influenced the decline in consumption in Europe during the heating season. The continent relies heavily on LNG imports, which is necessary to replenish supplies. With Dutch one-month forward futures down more than 50% since November, for US LNG volumes, exports to Asian markets in February and March are currently more profitable.
On Wednesday, January 4, the price of natural gas on the TTF fell to the lowest level since the beginning of the Russian invasion of Ukraine – 65 euros per MWh for futures. At the end of February 2022, just before the start of the conflict in Ukraine, the price of natural gas was around 88 euros per MWh.
After Russia significantly reduced gas supplies to Europe, the price reached EUR 340 per MWh for futures in August. On the first day in December, the price was 140 euros per MWh.
The unseasonably warm weather since the start of winter has given markets an opportunity to stock up for the rest of the heating season. European warehouses are currently at close to 84% occupancy.
LNG imports have helped offset gas deliveries via Russian pipelines. It reached 13.1 million tonnes in December, breaking the previous record of 11.85 Mt in November.
At the same time, European industry and consumers cut gas consumption by a fifth, responding to high prices and demands for savings.
Although it is estimated that Europe could end the winter with a sufficiently high level of storage, there is still cause for concern about energy prices. High energy costs make it difficult for energy-intensive industries to do business. In addition, energy prices are the primary reason for the spike in inflation across Europe in the past year, reaching 40-year highs in many countries.