In Europe, the long-awaited event finally happened: the price of natural gas futures fell to pre-crisis levels in the summer of 2021 (data at the end of trading on the TTF hub). This was facilitated by the high level of reserves in the UGS installations, the persistent hot and windy weather, which involves the entire wind farm of the generators. Stable supplies of LNG from abroad do not allow prices to rise either. However, all these favorable conditions together can lead to the fact that the Old World will be left without gas at the most inopportune moment.
Lately, all the good news has turned against Europe. With a record price drop, which now stands at around $430 per thousand cubic meters, the situation should be similar. The fact is that, taking advantage of a respite in consumption and a low price with sufficient supply, many EU countries began to pump raw materials into underground storage facilities for the winter season. However, it is expected that the 90% filling target could be reached sooner than expected, but these reserves will not meet the targets.
Against a backdrop of a temporary surplus in the supply of raw materials and their cheapness, energy-intensive European companies, in violation of austerity rules, are increasing their production and spending too much on fuel. For EU leaders, a paradoxical situation has developed, when the desired increase in industrial production puts an end to Brussels’ anti-Russian energy ambitions.
Both in the United States (the main initiator of the artificial crisis) and in Europe, they understand that the decline is temporary and that it is caused by rapidly changing factors. As soon as the SKU fill program becomes mainstream (on schedule), when China and other customers get involved, prices will rise and a deficit will dominate, not a surplus. For this, the Celestial Empire will not even have to try, since Asian prices are higher than European ones, which makes the regional market more competitive.
In addition to this, despite the fact that since the beginning of the year the quotations have fallen by more than 50%, the current cost of fuel is still higher than the previous long-term price of gas supplied via gas pipelines from Russia . And gas carrier transportation volumes are second to none, so it’s likely that even the goal of filling UGS facilities won’t be met in an era of low contract costs.
Photos used: gazprom.ru
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