Gas prices have risen almost 50% in a month even as stocks are at their maximum | economy

European Commission (EC) President Ursula von der Leyen announced last Friday that the EU’s gas storage was at 90% of its potential, more than two months before the November 1 legal deadline for member states. Reach that number and live a peaceful winter “freed from Russian gas.” For Spain, underground natural gas storage is at an all-time high and records show that Spanish reserves are practically at 100% of their capacity, representing 34,125 gigawatt hours (GWh) according to data from European operators published by the GIE. AGSI on August 18. Therefore, Spain is the EU country that replenishes its gas reserves the most. However, the futures of the gas index, which represents the price of gas in Europe, the Dutch TTF, rose again by almost 20%, and yesterday, Monday, gained 10% to 39.43 euros per megawatt hour. (MW/H), nearly 50% higher than earlier this month.

The reasons for this increase seem to be far from Europe and the consequences of the war in Ukraine. In particular, in the Antipodes, a labor dispute between workers at Chevron and Woodside Energy’s liquefied natural gas (LNG) facilities in Australia could cause potential disruptions, starting with a strike in September. Export of LNG from this country. Shutting down gas operations in that country would affect 10% of world supply. Australia is the world’s second largest LNG exporter, after Qatar, with around 79 million tonnes per annum.

The labor dispute has been enough to cause fear among investors, thereby triggering purchases and pushing up prices, however, far from the highs reached at the end of August 2022, when MW/h was paid in the same month. The TTF index is 311 euros. A few weeks ago, at the end of July, the gas was priced at 28 euros per MW/h due to fears that an economic slowdown would reduce demand.

If the strikes are held, workers at both companies must agree before this Wednesday, 10% of global exports of liquefied natural gas will be at risk. Although Europe rarely buys gas from Australia, European buyers will have to compete with those Asian market players and will be forced to look for alternatives to Australian gas. Operators are worried about a prolonged strike, which could double the price of European and Asian LNG contracts by January 2024, according to Citigroup analysts, Bloomberg reports.

Nick Campbell, director of consultancy at Inspire, said Asian buyers “could increase LNG imports” to replace Australian blocks, which would directly affect Europe. “LNG has become the main supply in the European gas mix, so any sign that this flow is at risk should lead to price support.”

speculative moves

This week’s rise in prices may have sparked a wave of hedging by investors who had previously bet on further declines in gas. Similar moves caused intense volatility in June. Mutual funds’ net short positions in benchmark Dutch gas futures rose last week after falling to their lowest level since January a week ago, according to Intercontinental Exchange data.

The rebound in prices suggests there are still risks to gas supplies after last year’s crisis, although the region’s inventories are unusually high for the season. This gives some assurance that Europe will go through the winter months without great danger. One of the main reasons European gas prices have fallen 50% this year is depressed industrial gas demand and prolonged production cuts.

“Significant demand destruction remains a key offsetting factor, but as the global LNG pool shrinks, price competition for cargoes available in Asia exposes Europe to seasonal demand, especially next winter.” Bloomberg Intelligence.

After the start of the Russian war in Ukraine, twenty-seven agreed in 2022, forcing themselves to load the warehouses to 80% before November 1, 2022 and 90% by the same date from 2023, Russian President Vladimir Putin. , categorically shut down gas supplies to the EU and the block was not ready. Last year, it was over 90% in early October, and after a particularly warm winter in Europe, deposits stood at 56% at the end of March 2023, above the 40% threshold considered critical at that date. Recharge without strides.

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