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24.12.2022 12:14 PM
The cost of gas in Europe has fallen below $900

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Gas prices in Europe fell below $900 per thousand cubic meters on Friday trading for the first time since June 13, that is, the gas price has fallen 11% in total since the start of the trading day.

January futures at the TTF hub opened trading in the red - near the level of $960 per thousand cubic meters. As of 2:13 p.m. London time, it already dropped below $900, to $897.2. In general, quotes fell by more than 25% during this week.

At the beginning of the week, the EU countries agreed on a limited exchange price for gas. The limit price is to be EUR 180 per MWh, or nearly $2000 per thousand cubic meters at the current exchange rate. This limit will come into effect on February 15 and will be valid for one year.

The EU is resorting to such a measure to prevent European households and companies from suffering from sudden spikes in gas prices. The very high cost of energy in Europe has caused the highest inflation in the union in decades.

Commenting on the gas price cap, the energy representative of the opposition Social Democratic Party of Austria, Alois Schroll, called this limit, which was agreed by the EU countries, an inadequate measure in the current market situation. According to him, this decision gives a completely wrong signal to speculators and does not bring any relief to either the economy or households.

Due to the desire of Western European countries to limit the cost of gas, the Russian government banned its gas giant Gazprom from fulfilling its obligations to unfriendly countries. So, until October 1 next year, the Russian energy company renounces its obligations to pay for services and supply gas and gas condensate to companies or individuals in those countries who risked introducing price caps on Russian energy carriers. The corresponding decree has already been signed by Russian President Vladimir Putin.

In general, the cost of gas in Europe became exorbitantly high last year. In spring, the TTF quotes varied around $250-300 per thousand cubic meters, but by the end of summer, they had already surpassed the level of $600, and in autumn - $1000. This year the winter months showed quite an outrageous level of gas prices - over $2000. In the spring, the prices were generally out of line: due to the possible ban on the import of the Russian energy resources the quotes reached the unthinkable level of $3892.

Since the beginning of September this year, the gas price in Europe dropped three times when, due to the suspension and then because of the explosion of the Nord Stream gas pipeline, the supply of Russian gas to the European region decreased rapidly. The situation was saved by the highest-ever level of storage capacity in the EU in recent years and the continued supply of liquefied natural gas.

Today's drop in prices can be explained by the fact that Europe is currently experiencing very warm weather, which is unprecedented for a winter month. Weather forecasters promise that it will remain so in most parts of the region for several more weeks. Strong winds in some parts of Europe are also important.

Andreeva Natalya,
Analytical expert of InstaForex
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