For a short while, gas prices on European markets turned negative on Monday afternoon. A sign that the demand was well below the supply.
Natural gas prices continue to fall. After dropping below € 100 the day before for the first time since June, the Dutch futures contract TTF, a benchmark in Europe, traded at € 98.75 per megawatt hour (MWh) on Tuesday.
And although the Old Continent is mired in an energy crisis with skyrocketing bills for many companies, the TTF contract for immediate delivery also briefly fell into negative territory on Monday. The first from October 2019.
In other words, customers who bought gas on the wholesale market at that short time were being paid to do so. A paradoxical situation that occurs for short periods in commodity markets when supply far exceeds demand.
But that’s exactly what’s happening with gas in Europe: nobody wants it anymore. At least for now. Firstly, because gas reserves are now at their maximum capacity within the European Union, where they would be filled to 93.6% at this stage, a figure well above normal.
Mild weather
Added to this is the exceptionally mild climate which is reducing the demand for gas for heating, especially as temperatures are not expected to cool any time soon. Finally, the slowdown in economic activity for several months and the sobriety imposed on producers also contributed to the decline in industrial demand for gas.
In this context, supply far exceeds demand. This brings prices down. Because producers are still trying to dispose of the excess gas rather than stop production, which would cost a lot more. LNG carriers are waiting on their side off the coast of Europe for the time to find a place to unload their cargo.
Although they have fallen significantly in recent days, it should be remembered that natural gas prices in Europe are still moving at high levels, up 40% from the beginning of the year. And experts expect a rebound in the coming weeks as temperatures drop. For the French consumer protected by the tariff shield, however, this price volatility has no impact, up or down, on the bill.
