$2 gas in Europe is here: who will blink first? [GGP]
The definition of $2 gas was that the average monthly price for TTF or NBP would start with $2 at the beginning i.e. be below $3 per MMBtu —either the average day-ahead price for the month or the month ahead index as used in the October paper. The possibility of this occurring, however, was seen as being most likely in the July to September period, as European storage approached full capacity and as LNG supply was ramping up. Broadly a price below $3 per MMBtu would be the same as a price below €9 per MWh. R
emarkably we now have $2 gas before the winter has ended. The month ahead index for March for TTF is $2.91 per MMBtu and for NBP was $2.88 per MMBtu. The average day-ahead price in February for TTF was just under $3 per MMBtu and for NBP just over $3 per MMBtu. Back in October, the key factors which were thought of as possibly triggering much lower prices were a Ukraine transit deal being agreed, a mild winter in Europe, lower Americas and Middle East LNG imports, pipeline imports into Europe remaining at 2019 levels and lower emerging Asian demand. The first two factors have come to pass but the accelerating factor has been the impact of the coronavirus on economic activity in China and the resultant decline in LNG imports. This has also resulted in Asian spot LNG prices falling below $3, with the ANEA month ahead price for March averaging $2.92 per MMBtu.
This follow up Energy Comment will reassess the rising LNG supply coming onto the market this year, and the prospects for LNG imports outside Europe. In Europe the summer demand and indigenous production situation will be considered, together with the rising level of gas in storage, to assess the supply gap for pipeline and LNG imports. Possible outcomes will be discussed to see which of the suppliers to Europe—indigenous production from Norway, pipeline imports from Russia, Algeria and Azerbaijan or LNG imports—will blink first.
Read full paper here: $2 gas in Europe is here: who will blink first? by Mike Fulwood, Oxford Institute for Energy Studies.
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