Gas prices in Europe are falling, but the geopolitical risks remain
The Dutch and British wholesale gas price fell on Tuesday due to increased wind power and a steady Norwegian supply. However, geopolitical tensions continued to support the prices, which are now near their highest level this year.
LSEG data shows that the benchmark front-month contract for the Dutch TTF hub fell by 1.29 euros to 39.61 euros per Megawatt Hour (MWh) at 0834 GMT.
The British front-month price fell 0.99 pence to 99.85 pence, while the British day-ahead was 2.75 pence less at 97.25 p/therm.
Elexon data shows that the peak wind generation in Britain will increase from 11.9 gigawatts on Tuesday to 15 GW on Wednesday.
LSEG data revealed that the demand for local distribution zones (LDZ), which is mainly heating-related, increased by 10 million cubic meters (mcms) per day due to colder weather forecasts.
Norwegian gas flow to Britain increased by 5 mcm/d from Monday.
In a morning report, LSEG analyst Wayne Bryan stated that despite the relatively weak fundamental position we expect volatility and swings in price to continue.
He said that the risk of geopolitical unrest in the Middle East, Ukraine, and elsewhere remained a constant. In addition, there was a risk associated with major revisions in Norwegian gas maintenance schedules.
Denys Shmyhal, Ukrainian Prime Minister, confirmed that Ukraine does not plan to extend the gas transit agreement with Russia when it expires in the end of this year.
Analysts also expressed concern that transit could be stopped before then due to attacks on energy infrastructure.
Daniel Hynes is a senior commodity strategist with ANZ. He said that higher prices in Europe have attracted more liquefied gas (LNG). Three LNG tankers from the U.S. changed course after originally heading to Asia.
The British electricity and gas grid operators are expecting sufficient supplies of gas and power this winter. This is due to the fact that more gas and electricity will be imported than last year, and there is a higher gas storage level in Europe.
The benchmark EU carbon permit contract on the European market fell 1.27 euros to 60.49 euro per metric ton.
(source: Reuters)
