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In the first week of September 2024, high European gas reserves kept settlement prices below €40/MWh. However, maintenance work in Norway and potential increases in demand due to weather forecasts led to higher TTF gas futures prices by the week’s end.
Price movements:
- On Monday, September 2, futures prices hit a weekly high of €38.58/MWh.
- By September 4, prices dropped to a weekly low of €35.80/MWh, the lowest since August 6.
- Prices began to recover towards the end of the week, with a settlement price of €38.41/MWh on Friday, September 6, still 8.4% lower than the previous Friday.
Market dynamics:
- The Dutch TTF hub’s front-month gas contract, trading around €37/MWh, reached a one-week low on September 3 as EU gas storage levels hit 92.5%, suggesting robust winter preparedness.
- High gas storage levels and increased LNG imports mitigated lower Norwegian supply during maintenance, leading to a slight dip in futures prices on September 2 and 3.
- By Thursday, September 5, benchmark futures fell up to 2%, hitting a one-month low. Prices had dropped more than 10% over the previous three sessions but recovered with a 4% rise on Friday, driven by cooler weather forecasts and strong storage inventories.
Future contracts and market trends:
- As of the latest update, the one-month forward contract at TTF was trading at €35.52/MWh.
- European natural gas prices saw gains at the end of Week 36 due to heightened competition for LNG, particularly from Egypt, which plans to import 20 cargoes starting in October. This has raised concerns about Europe’s market balance, as increased demand elsewhere could impact supply availability.
Geopolitical and supply considerations:
- The market is closely monitoring the impact of the expiring transit agreement between Ukraine and Russia. Azerbaijan’s President Ilham Aliyev indicated discussions with Moscow and Kyiv regarding gas transit facilitation.
- Temperatures are expected to drop in northwest Europe, potentially increasing gas demand.
Ukrainian transit updates:
- Since August 6, 1.29 Bcm of gas has been supplied through the Suja GIS (Sudzha) for transit to the EU and Moldova, with Slovakia receiving the majority.
- Gazprom’s revenues from these supplies are estimated at $536 million, though actual figures may vary due to long-term contract pricing.
- Naftogaz of Ukraine, acting as an intermediary, earned $71 million in August. Issues persist with Gazprom’s payment for reserved volumes on the closed GIS Sokhranovka route.
- Most of the Ukrainian transit gas is delivered to Austria and Slovakia, where Gazprom’s share in imports exceeds 50%. Kiev is exploring mediation options for extending the transit contract, potentially involving Azerbaijan or European intermediaries.
Conclusion: The European gas market remains dynamic with fluctuating prices influenced by storage levels, geopolitical factors, and competition for LNG. The upcoming winter and transit negotiations will continue to impact market conditions and pricing.
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