TMN - Natural gas

European Gas Market: Prices and Reports

One of the most common questions we can hear nowadays is what the European gas market prices are? Does Europe has natural gas at all, and where can it be found? And why are gas prices skyrocketing lately?

It’s clear that a long winter is ahead of us and that Europe is dealing with a crisis and concerns about whether it will be able to heat all of its homes, buildings and businesses in the months to come. However, to answer these questions, we’d like to give you a brief explanation of why prices of European gas are soaring this year and what is happening with supply and demand.

European natural gas supply-demand after COVID-19

2020 was a very challenging year since the whole world has been dealing with the pandemic of COVID-19. Gas has crucial importance across Europe, often being the number one choice for heating homes, buildings, and offices. It’s mainly used in industrial manufacturing.

However, there’s been a substantial demand-supply gas imbalance in Europe. It has resulted in bullishness throughout the year that’s seen for the first time in a very long period. Europe’s leading benchmark gas contract at the Dutch Title Transfer Facility (TTF) has risen from 36 EUR per megawatt-hour in March to reach an incredible record above 119 EUR on October 6.

That incredible peak halved at the beginning of November when the price was 61 EUR. Nonetheless, the gas prices on the European gas market have once again gone higher, towards 75 EUR. It means that, even like that, during the year, the prices have more than tripled.

Andreas Gandolfo, the European Power team leader at BloombergNEF, stated that the gas could go as high as necessary to knock demand out. He also said that European gas has become too expensive for some European industries. It can very likely go a lot higher before there is a decision to switch off.”

Does Europe have natural gas?

One of the most popular questions nowadays, regarding this topic, is: “Does Europe have natural gas? ” The short answer is yes, Europe does have natural gas. The largest field of natural gas is found in the Netherlands (Groningen).

The second largest is called Troll Field, found in 1979. It’s located in Upper Jurassic sandstones in the North Sea, 100 km off the coast of Norway.

Where to find natural gas in Europe?

For those keen to know where natural gas is found in Europe, it is Groningen in Northern Netherlands. It has original recoverable reserves of 99 to 99 tcf (2.7 to 2.8 TCM). Natural gas was discovered in 1959 on the coast of this Dutch town.

Four years later, in 1963, it went into production. Approximately 60% of the original reserves have managed to be recovered.

European Gas Market Overview

Nobody could have guessed the seriousness of the situation until Germany suspended the process of certifying Nord Stream 2, a new Russian gas pipeline. When it comes to the European Gas Market overview, it’s clear that the prices on the European gas market seem to be skyrocketing in the past few months.

We can note that, quite recently, European gas futures rose more than 20%. Meanwhile, the UK’s wholesale prices surged as well. Some factories in the United Kingdom and Europe closed in the past couple of months due to the unprofitability of their operations, which is devastating. 

As colder weather comes, will Europe be able to source all the necessary energy to heat households and power buildings amid a worldwide scramble for fuel?

The expert in energy and geopolitics, Nikolas Tsafos, recently stated that the European Gas market, and markets in general, are incredibly jittery. That lack of certification is the reason for global anxiety.

Why did Germany not approve Nord Stream 2?

Perhaps one of the main questions regarding the European gas market is the main reason behind Germany’s decision to reject Nord Stream 2 from Russia. That is because the pipeline operator, which is based in Switzerland, seems to be based on a legal technicality.

Nonetheless, once the gas is expected to start flowing, the move will delay. According to analysts, it’s a turning point that could mitigate Europe’s energy shortfalls.

What are the European gas market prices in 2021?

Speaking of the first half of 2021, the average European gas market prices in the EU registered the inverse path. Moreover, they have slightly decreased to 6.4 EUR per 100 kWh. Lately, general prices for gas and electricity are substantially increasing across the European Union.

The corresponding share for gas bills was 36%. When it comes to the second half of 2021, the Official European statistics will be available in April 2022. However, it’s very crucial to remember that the average price for natural gas consumption per household consumer in the European Union during the first half of 2021 stood at 0.0639 EUR per kWh.

The forecast of the European Gas Market

Since the prices of European Gas have increased significantly, numerous experts, alongside environmental campaigners and anti-poverty organizations, have warned that millions of Europeans may not be able to afford to heat their homes during the winter. The main reason for that is the leap in gas and electricity prices as well.

Recent research led by Professor Stefan Bouzarovski, the chair of the energy poverty research network Engager, discovered that more than 80 million households across Europe were struggling to keep their homes heated before the COVID-19 pandemic.

In addition to that, the current price spike is likely to make matters even worse. Russian Nord Stream 2 delays could also impact the energy market beyond the winter to come. The prediction is that certification will probably reach completion around April 2022 at the earliest.

Many experts agree that operations are not likely to start before the second quarter of 2022. The result will be the prolongation of the scramble for liquified natural gas, which is in high demand at the moment.

Conclusion of the forecast

According to Rystad Energy, Europe may continue its dependence on an already tight liquefied natural gas market. That suggests a great possibility of a sustained high price environment during the first half of 2022 if Europe emerges with severely depleted storage.

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