Comment of BIA
1. Gas prices and stocks in Europe:
Last week, gas futures for delivery in March ranged between 72-79 euros per megawatt-hour in the Dutch TTF, ending on Friday at 77.6 euros per megawatt-hour. This level is lower than the prices observed at the end of January.
It should be noted that today, February 14, the price jumped to 83 euros per megawatt-hour, after new warnings were issued last Friday night about a potential military conflict in Ukraine. The price of gas for contracts in 2022 has also risen and is now between 81-85 euros per megawatt-hour.
Gas stocks in Europe fell to 34.4% on Friday. It is projected that together with the supply of liquefied natural gas and the lower need for heating, this amount should be sufficient to cover current consumption this winter season (other things being equal).
Bruegel's data show that gas imports from Russia to Europe increased significantly last week compared to the volumes observed in January (by about 25%).
2. Further development of the gas market last week:
The meeting of the US-EU Energy Council last week did not bring any concrete follow-up, except for the generally agreed position on bilateral cooperation to ensure security of supply for Europe. At the same time, it is reported that the EC continues to "liaise with partners" to secure additional natural gas / LNG supplies. In the first such announcement, Japan announced last week that it would reroute additional liquefied natural gas ships to Europe at the request of the EU.
Last week, the EC also stopped a 2018 antitrust investigation by Qatar Energy, which was mentioned by Qatar earlier as a prerequisite for the supply of additional LNG to Europe.
According to EC officials, the suspension of the investigation is not related to security and supply tensions.
The EC continues to work with Member States to assess contingency plans for gas supply disruptions. The results of this analysis are expected in late February.
China has agreed on a new 30-year gas supply agreement with Russia, which will provide the country with an additional 10 billion cubic meters of natural gas a year.
The assessment is that the contract and the time of its announcement are rather geopolitical statements, as the volumes of the contract are not significant. By comparison, last week alone the EU imported 8 billion cubic meters of gas from various suppliers.
Russia has been invited by Qatar to a two-year summit at the Forum of Gas Exporting Countries, hosted by Qatar. The meeting will take place on February 22. Among the invited countries are Iran and Egypt. European countries and the United States are not part of the forum.
Ukraine is speeding up its plan to synchronize its energy system with the EU grid. The country plans to shut down its system from Russia and Belarus on February 24-26 and conduct an island test. Full synchronization with the EU network is planned for 2023.
High gas and electricity prices are also reflected in rising aluminum prices, which last week were at their highest level since the financial crisis. For example, the Financial Times reported that the capacity losses of smelters in Europe are now over 800 000 tonnes.
The price of Brent crude oil rose even more and reached $95 per barrel.
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Author: Silviya Todorova, director of the Entrepreneurship Center at BIA
