MOSCOW, January 17. /TASS/. The surplus of gas in the EU market and reduction in its consumption led to the abnormal decline in the price of gas in Europe. However, such factors cold weather and redirection of LNG supplies to Asia can put an end to the drop in prices, according to experts interviewed by TASS.
"Prices are falling as there is currently a gas surplus in Europe, and its consumption is still under serious pressure. If such prices persist for a couple of months, a more confident recovery in consumption will begin," said Kirill Melnikov, head of the Energy Development Center.
He added that in general, the current price decline already looks anomalous in relation to the overall market situation.
"Besides, the weather in February-March is important, since the volume of reserves in UGS facilities in the winter and the amount of gas that Europeans need to pump in during the summer will depend on it," the expert noted.
Earlier on Tuesday, the price of a February futures contract at the TTF hub in the Netherlands fell below $600 per 1,000 cubic meters for the first time since August 30, 2021. The total price reduction per day was 5%.
"This is due to two factors. The weather. The first half of the winter was abnormally warm most of the time, which significantly reduced the need for heating. Plus, it was quite windy, which supported an average higher generation at wind farms. The second factor is deindustrialization. The reduction in industrial production in Europe, tied to the consumption of gas and electricity," said Alexey Grivach, deputy head of the National Energy Security Fund, expert of the Valdai Club.
Volatility on the gas market will continue in the near future, and the weather will remain the decisive factor, Grivach said.
"Following the decline [of the price] will be followed by an increase due to cold weather or redirecting LNG cargoes to Asian markets," he concluded.
On filling UGS facilities in Europe
The weather in Europe now remains warm enough for the winter, the temperature will approach the climatic norm only this week. Since the beginning of the year, the average share of wind generation in electricity generation in the EU is also very high and exceeds 26%. On January 15, this share even reached 35.4%, which is a record high figure for the entire time of observation.
Gas reserves in EU underground storage facilities are at an all-time high for this time of year. Now UGS facilities in Europe are 81.49% full (19.32 percentage points higher than the average for this date over the past 5 years), they contain 88.24 billion cubic meters of gas. However, Gazprom warned that even when gas reserves in UGS facilities are close to the maximum in large European countries this does not guarantee them a reliable passage of the autumn-winter period. The load on UGS facilities in Europe in winter will be higher than in previous years due to changes in logistics and gas supply sources.