On the eve of winter, the price of natural gas on the European market is 16 percent lower than it was a year ago, and European storage facilities are 94 percent full. This situation should limit a sharp increase in prices, but there are some threats. The transit of Russian gas through Ukraine might come to an end by the end of the year, which could lead to a price hike. In addition, tensions in the Middle East might affect the market, and an exceptionally harsh winter could also drive up costs.
With the start of autumn, it’s worth observing the prices of natural gas on the global markets. This period usually brings uncertainties about gas price increases and the condition of European reservoirs. This year, however, the situation appears to be better as natural gas prices are lower than in previous years.
Autumn and winter are seasons when the demand for gas increases. In Europe, the prices of natural gas (for October contracts) have recently slightly risen to about 36 euros per MWh, which is 16 percent less than a year ago. The highest price in the last 12 months was almost 55 euros per MWh, reached on 8 October 2023. Since then, prices have been regularly decreasing. This year may follow a similar trend, but gas prices remain susceptible to external factors such as weather and geopolitics.
Last year, the winter in Europe was mild, and forecasts for this year predict temperatures above the average. If there was a sudden dip in the temperature, gas prices could drastically increase.
Another critical factor is the geopolitical situation, especially access to Russian gas. European storage facilities are currently 94 percent full, which provides some stability in the market. However, by the end of the year, the transit contract for Russian gas through Ukraine will expire. Despite the war, this route remains crucial for gas supplies to Europe, mainly for Slovakia, Hungary and Austria. Ukraine has announced that the contract will not be renewed. On 19 September, the price of gas in Europe fell by 12 percent to 32 euros per MWh, the lowest level since June this year, due to news of possible cooperation with Azerbaijan, who could supply gas, possibly also re-exporting Russian crude. Negotiations on this matter are ongoing and may affect gas prices in the coming months.
Further tensions in the Middle East, a crucial region for gas supplies to Europe, could also have an impact on the market. Technical problems, like those in Norway, which have limited supply, also play a part.
The final factor influencing gas prices is demand. In recent years, we have seen a decline in gas consumption, including in Poland. In 2023, gas consumption in Poland amounted to 19.6 billion cubic meters, whereas in 2021, it was 22.4 billion cubic meters. Nevertheless, falling interest rates in the US and Europe may boost economic activity, which in turn may result in increased demand for gas.
Paweł Majtkowski, market analyst at eToro
Source: https://ceo.com.pl/w-przededniu-zimy-gaz-tanszy-niz-rok-temu-99045
