The wholesale price of gas for the European market falls sharply on Tuesday. The reason is apparently the high level of stocks of this commodity in Europe. The price of the key gas futures contract for delivery in October at the Title Transfer Facility (TTF) virtual trading hub in the Netherlands lost roughly 12 percent to 217 euros (about 5,300 CZK) per megawatt hour (MWh) shortly after noon. However, it still remains many times higher than a year ago, when it hovered around 30 euros per MWh.
Gas prices in Europe are being pushed up this year by supply cuts from Russia. The situation surrounding Russian gas supplies became more complicated when Russia launched an attack on Ukraine in February and the European Union enacted a series of anti-Russian sanctions in retaliation. On Monday, the price of gas rose significantly in response to the suspension of supplies through the Nord Stream 1 gas pipeline.
Last week, the European Union met its goal of filling 80 percent of its gas reservoirs by November ahead of schedule. According to data from Gas Infrastructure Europe (GIE), storage tanks in the EU were almost 82 percent full on Sunday. In Germany, which is the largest consumer of gas in Europe, the storage capacity was more than 86 percent, in the Czech Republic approximately 82.5 percent.
According to GIE data, neighboring Poland’s reservoirs are almost 100 percent full, and Slovakia is close to 80 percent. The worst situation in the European Union is Latvia, where the reservoirs are filled to about 50 percent. Ukrainian reservoirs are almost 28 percent full.
Russian gas company Gazprom said last week that it will keep the Nord Stream 1 gas pipeline out of service until defects found during maintenance are fixed. Nord Stream 1 transports gas from Russia to Germany along the bottom of the Baltic Sea and is the main route for Russian gas supplies to the European Union. On Monday, Kremlin spokesman Dmitry Peskov said Nord Stream 1 would remain out of service until the West lifted anti-Russian sanctions imposed after Russian troops invaded Ukraine.
Ratings agency Fitch said the pipeline’s supply disruption came four months earlier than it had expected. However, she added that Europe had prepared for this eventuality. EU steps including increasing alternative gas supplies and a planned 15 percent reduction in consumption should help avert acute gas shortages, she said. However, the agency noted that there are many uncertainties surrounding the winter gas market in Europe, including how cold the winter will be, how high liquefied natural gas (LNG) supplies will be and how the war in Ukraine will develop.
Experts contacted by Reuters are similarly skeptical. According to them, the gas in the reservoirs will not be enough if the countries of the European Union cannot limit its consumption. Analysts at Aurora Energy Research say supplies will last three months at most. “To deal with this crisis situation, reducing demand will be even more important than stockpiling,” said Simone Tagliapietra, head of the Bruegel think tank.