Natural gas is taking a break after recent hikes. The week starts with strong sales on Dutch TTF gasbenchmark for Europe, which has come to lose more than 20% to 268 euros per megawatt hour in the wake of the faster-than-expected increase in German stocks and a possible agreement shortly between France and Algeria (third supplier to Europe after Russia and Norway) due to the approximately 50% increase in imports of LNG (liquefied natural gas).
Germany and France are moving forward to stock up on gas
The price of natural gas in Europe returns to April levels, after Germany declared that its gas deposits are filling up faster than expected before winter. The Dutch futures benchmark today reverses course after a nearly 40% jump last week.
According to the Minister of Energy Robert Habeck, Germany’s gas storage facilities are filling up faster than expected despite uncertainty over supplies via a key pipeline from Russia. “Companies will then be able to withdraw gas from storage facilities as planned during the winter to also supply industry and households,” the minister said in an interview with the weekly Der Spiegel in an interview yesterday.
Germany is tightening time to saturate gas storage in time for winter after Russia slashed flows through the Nord Stream 1 pipeline, driving up prices and exacerbating Europe’s worst energy crisis in decades. The ruling coalition in Berlin has imposed that the facilities are 85% full by October and 95% by November.
According to the latest report from the Federal Network Agency, strategic gas deposits were 81.3% filled on Friday, with flows through Nord Stream at around 20% capacity. The October target will already be reached early next monthSpiegel reported, citing a document from the Ministry of Economy.
Progress also for France on the gas front. The French president, Emmanuel Macron, and his Algerian counterpart, Abdelmadjid Tebboune, declared a “new, irreversible dynamic of progress” in relations between the two countries on the final day of Macron’s visit, aimed at ending months of tensions between France and his former colony, which less than two months ago celebrated its first 60 years of independence. The text of the agreement, while not mentioning the supply of Algerian gas in the face of the threat of Russian cuts, mentions “cooperation in the gas and hydrogen sectors”.
Still several critical factors to be resolved
To tell the truth, some analysts say, “the supply situation remains very fragile because Europe is grappling with the worst energy crisis in decades. Lower flows from Russia, outages in Norway and growing competition for LNG supplies are all downsides that are not going to go away in the short term.
European governments are also putting in place measures for lighten the burden of dear energy, allocating around 280 billion euros, but that may not be enough. The Czech Republic, which holds the rotating presidency of the European Union, will convene an extraordinary meeting of energy ministers to discuss the idea of limiting electricity prices.
Finally, don’t forget that Gazprom announced two weeks ago that will stop gas supply to Europe via Nord Stream 1 for three days starting Wednesday. On this side, the European authorities fear that supplies may not resume after this interruption. “It is likely that stocks will be sufficient this winter,” Morgan Stanley says, adding: “This will likely be true even if Nord Stream 1 flows drop to zero, although a prolonged outage throughout 2023 would make a winter of 2023- 24 very rigid “.