Agreement at the meeting of EU energy ministers. After all, the introduction of the ceiling on natural gas last Monday was accompanied by a significant reduction in prices in the following days of the week.

The base price in Europe for deliveries in January in the Amsterdam market (TTF) “fell” from 134 euros the previous Thursday, 15 December, to 85 euros/MWh on Friday, 23 December.

For six consecutive days, prices fell, recording a total drop of almost 50 euros, or 37%, while the week was down 26%. At the current level, the price of natural gas is 95 euros below the ceiling of 180 euros agreed in Brussels.

The fall in prices in the previous period is due to market factors, a combination of factors such as:

• increase in supply due to record imports of liquefied natural gas (LNG) and large wind energy production in Germany;

• reduced demand due to unusually high temperatures in Northern Europe this week and

• high filling capacity of gas storage tanks.

However, the cap created a sense of confidence in the markets that the extremely high prices of August and September would not happen again. During this two-month period, prices exceeded 180 euros for 40 days, with painful consequences.

To activate the ceiling, the price of the benchmark TTF index must be above 180 euros for three days and, on the other hand, exceed the price of LNG supply contracts by 35 euros over the same period. The second condition was put forward in order for Europe to be able to attract LNG cargoes and thereby satisfy the concerns expressed by Germany and other countries.

The ceiling will be in effect for 20 days, but it can also be suspended if there are risks with ensuring the necessary supplies.

The European Commission will be able to decide to suspend it if conditions are met, such as an increase in gas demand of 15% within one month or 10% within two months, a significant drop in LNG imports, or a significant drop in trading volume on the Amsterdam Stock Exchange in compared to the corresponding period last year.

Returning to the reasons that led to the price decline this week, wind power in Germany is expected to top 30 GW next week, or about 50% above normal levels, according to Norwegian energy information company Montel.

Most notably, however, LNG imports set a new weekly record of over 4.4 billion cubic meters last week, while a monthly record is expected in December when imports top 18 billion cubic meters.

In addition, gas storage capacity in Europe was last at 83%, slightly down from 85% last week but well up from 57% a year ago.

Source: RES-IPE