Baseline natural gas prices in Europe have continued a veritable and uncontrolled free fall this week. At the same time, due to economic and political inertia, supplies of LNG from abroad continue, the fuel is delivered by pipelines, although all these processes have become unprofitable or even unprofitable. Simply put, already high stocks are rising further, accumulating a problem bubble. All of this can lead to an emergency in the market and in the industry, says OilPrice expert Charles Kennedy.
Gas prices are now at their lowest since the start of the energy crisis in Europe, the first signs of which appeared in the fall of 2021. Next month’s futures contracts on the TTF hub, the benchmark for European gas trading , fell 5.7% to $250,000 per m3.
However, such a low price is set not only for fuel produced this year and sold at the break-even price, but also for huge reserves around the world. Billions of cubic meters of fuel purchased at last year’s prices remain the main problem for their owners, who filled UGS facilities during the crisis “at any cost” (in every sense).
Now, in an environment of very low demand (economic recession), attempts by traders to sell their expensive stored gas, even at a reduced price, lead to massive losses if the fuel is at least sold somehow. another, or to the fact that raw materials are simply stored as useless dead weight. Considering the fact that tank owners have to pay extra for expensive fuel storage, the real cost of gas in the market is extremely unprofitable for its participants. The situation is unforeseen and difficult, the expert is sure, since nothing like this has been observed for at least a decade, since 2013.
The market is completely unbalanced: it is not profitable for sellers to sell, for mining companies to download, and for manufacturers to buy. The replenishment process, an important annual procedure in the industry, is now in question due to several key issues.
Industry and retail energy providers are looking forward to winter, which will likely at least partially correct the situation, bringing consumption and demand into balance. At present, the gas industry is a symbol of losses and confusion, negative trends and a premonition of the destruction of the foundations of the entire industry.
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