Analysis Energy
Gas price unaffected by weak demand
While the gas market remains stable, the price of electricity varies considerably. The gas price is falling despite low demand due to various factors. Meanwhile, the electricity price is being pushed down by stronger wind than expected for this time of year.
The gas price remains fairly stable. On Tuesday, July 2, gas was traded at €33.69 per megawatt-hour. By Wednesday, July 3, the gas price had dropped to €32.69. The price then rose again to €33.60 on Monday, July 8.
In the gas market, low demand and various risks keep each other in check. Overall, there is calm in the gas market. After months of disruptions, gas is now flowing faster than average to the European market from the Norwegian market. Additionally, temperatures remain mild, keeping the demand for gas to generate electricity for air conditioning low. Furthermore, European gas stocks are filled to 78.8%, which is a significant 14.4 percentage points above the average.
The pace of stock replenishment remains lower than average. Throughout most of the filling season, the pace has been slow. In the last seven days for which data is available, the filling pace was 15.8% below average. This is fairly consistent with the filling pace of June, during which the gas stock was replenished 15.3% slower than average. This slow pace did not go unnoticed. This week, the Dutch Gas Union expressed concern for the first time about the speed at which reserves are being replenished.
Risks prevent decline
On the other hand, real relief is not yet in sight. This is partly due to Hurricane Beryl. The hurricane is causing a lower LNG supply in the American market. On Monday, July 8, Beryl moved from Mexico to the northern part of the country. Beryl is currently passing over the Caribbean and has already claimed the lives of eleven people. Due to the hurricane, activities in various ports in the state have been suspended. This also applies to activities at the major LNG upload facility, Freeport LNG. The facility has since reduced its capacity. As Europe has become the main market for the United States, the inactivity of the major facility directly affects the European market.
Additionally, the Asian LNG price has passed its peak but not enough to bring stability to the market. High temperatures continue to drive significant demand. On Tuesday, July 2, LNG was traded at $12.56 per mbtu. According to the latest available bare quotation from Friday, July 5, LNG was traded at $12.49 per mbtu. This is 25 cents less than the peak on June 25, when the LNG price was $12.75 per mbtu.
Unstable electricity price
The electricity price was quite unstable last week. At the beginning of the week, the price was quite high. Especially on Wednesday, July 3, a significant amount was paid for electricity. That day, the price rose to €94.46 per megawatt-hour. The price then took a downward turn. At the lowest point on Saturday, July 6, the price was even negative. On that day, the price dropped to -€4.09 per megawatt-hour.
Leading in the electricity market this week was wind energy. Usually, a lot of solar power is generated in the summer, but the wind strength is low. However, the wet 2024 has been accompanied by extra wind so far. This was again the case this week. The share of wind energy in the energy mix was greater than the share of solar energy this week. In total, 31.9% of all electricity was generated by solar panels. Wind had a combined share of 34.9% in the energy mix. This is favorable for the electricity price, as wind is generally more consistent than solar, keeping the price constant. The share of the most expensive fuel, natural gas, decreased to 21.6%.
On days with strong winds, the price dropped significantly. For example, on Friday, there was almost constant wind energy production of at least 5.5 gigawatts, with peaks around 7 gigawatts. Production was slightly lower on Thursday and Saturday, but the sun was also shining brightly. This resulted in 25 hours with a negative electricity price. Due to a combination of strong sun and wind and low weekend demand, the price dropped to -€116.61 per megawatt-hour between 3:00 PM and 4:00 PM.
