On Friday, June 27, the largest weekly price drop has been recorded on the European gas market for almost two years. Termatic contracts in the Dutch Huba TTF got cheaper that day by 3.2 percent, and the whole week ended with a 19.5 percent reduction. The price of gas on the main court of Europe has dropped from 40.93 euros/MWh to 32.93 euros, which corresponds to $ 407. for 1000 cubic meters.
According to Rzeczpospolita, the breakdown of prices began on Tuesday, after the increase in oil ratings and announcing the cessation of hostilities between Iran and Israel. Thanks to this, the threat of the Strait of the Ormuz disappeared, through which about 20 percent are transported. World LNG.
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Changes in the gas market and the impact of exchange rates
“The Moscow Times” – the title that “Rzeczpospolita” cites – points out that for European recipients the gas price expressed in dollars is currently higher than in euros. This is due to a decrease in the value of the American currency, which has lost over 13 percent since the beginning of the year. and reached the lowest level from September 2021.
Part of the gas imported to Europe by sea comes from Qatar (about 10 %) and the United Arab Emirates. In the case of escalation of the conflict in the Persian Gulf, deliveries from these countries could be seriously disturbed, because tankers and gasworks must flow through the narrow strait of the Ormuz.
The Russian Institute of Energy Economics and Financial Analyzes emphasized in a Friday statement that disturbances in one of the world's main transport nodes usually lead to an increase in costs, prolonging delivery time and problems in global trade.
Chinese demand and gas surplus in Europe
The decrease in gas prices in Europe is also affected by the weakening demand in China – notes “Rzeczpospolita”. The local economy slows down, and the country is more and more actively investing in renewable energy sources. From the beginning of the year, China has not bought any LNG from the USA, which is the result of Donald Trump's policy, the growing domestic production and tariff disputes with Americans. As a result, Chinese companies with long -term contracts are redirecting deliveries to Europe, which leads to hypertension and further decrease in prices.
Warehouse situation in Europe
The gas storage season is currently underway, which is beneficial for operators preparing for winter. Gas warehouses in the European Union are filled in 57.6 percent, and in Poland – in 61.26 percent. Although for the whole Union it is a lower result than the average of the last five years (over 60 percent), the Bloomberg agency notes that more LNG is coming to Europe now than usual at this time of year.
Term contracts with delivery for December ended a week at 35.84 euros/MWh, which is not much above the price of the nearest contract. It is worth emphasizing that all this happens in the absence of Russian gas in EU pipelines – we read in Rzeczpospolita.
