MOSCOW, 3 Sep — PRIME. The average settlement price of gas in Europe in August rose by 35%, to almost $2,450 per thousand cubic meters and for the first time reached a record $3,500, according to RIA Novosti calculations based on data from the London ICE exchange. Such high prices have not been seen since 1996, since gas hubs have been operating in Europe.
Gas futures with the nearest delivery in September started August at $2,100 per thousand cubic meters and traded in the range of $2,000-2,200 for the first half of the month. However, on August 15, quotes exceeded $2,400 for the first time in five months. Analysts attributed this to preventive work at Norwegian production facilities and on the system through which gas is supplied from Azerbaijan, as well as increased competition for LNG from large importers from Asia.
Then, on August 19, after Gazprom announced a three-day suspension due to maintenance of the Nord Stream pipeline, prices jumped by almost 8%, above $2,700 per thousand cubic meters, and a week later they crossed the threshold of $3,500 and approached historical high of $3,892. However, then in a few days they fell by more than $1,000. So far, quotes are about ten times higher than last year’s prices, when gas prices were already record high.
The average monthly settlement price of gas in Europe has been growing for the fourth month. The indicator in May was 1030 dollars, in June – almost 1180 dollars (+14.6% in monthly terms), and in July – about 1805 dollars (+53%). Already in August, the figure slightly exceeded $2,450 (+35.7%).
EUROPE IS “READY” FOR WINTER
Decrease in gas prices in Europe for the week from peaks of $3,500 by about 30% was facilitated by statements by EU representatives about “readiness” for winter, explains Dmitry Skryabin, portfolio manager at Alfa Capital Management Company.
European companies, according to the Association of Gas Infrastructure Operators of Europe (GIE), in the last days of August – two months earlier – reached the target level of occupancy of 80%. In total, more than 100 billion cubic meters of gas can be pumped into European storage facilities, but this is only about 25% of the annual consumption of “blue fuel” in the region. Even a 100% workload of the “subways” does not guarantee the European countries a reliable passage of the autumn-winter season.
Also, gas market participants are less worried about the non-resumption of supplies via Nord Stream on September 3 after maintenance, adds Yan Melnichuk, a personal broker at BCS World of Investments. The three-day shutdown of the pipeline deprived Europe of almost 100 million cubic meters of Russian gas, which corresponds to two days of filling up gas storage facilities in the region.
GAS STARTS THE NEW SEASON WITH NEW TESTS
Quotes will remain quite volatile, as the supply process is now more tied to the political plane, said an analyst at BCS World of Investments. Now the Europeans are discussing the price ceiling for Russian gas. It is not known whether, with their possible introduction, deliveries from Russia will be stopped. Limiting Russian gas imports will push prices to new heights
The cost of gas in autumn and winter will depend on a host of factors, adds Skryabin from Alfa Capital. Among them, in addition to supplies from Russia, are temperatures in Europe, a recovery in gas demand in China and competition for fuel in the global market, as well as the possible consequences of the hurricane season in the United States, a major global supplier of liquefied natural gas.
The introduction and enforcement of energy saving regimes, regulation of prices in the energy markets of the European Union and greater use of alternative energy sources can contribute to lower prices, he added.
“In general, we see the preservation of gas prices above $2,000 as the most likely scenario for at least the coming half of the year,” the analyst from Alfa Capital concluded.