In Europe there is an amazing price for natural gas, storage has exploded and has not arrived: the infrastructures are too weak
While the price of natural gas in the US state of Texas fell into negative territory this week, the price of natural gas in high-frequency trading in Europe also turned negative around the same time. Europe and the United States, suffering from a shortage of natural gas, now absurdly have no one to take control of.
Natural gas prices at the Waha Center in the US Permian Basin fell 85% to close at $ 0.41 per million British thermal units on Monday and fell further to around $ -2 per million thermal units on Tuesday. British.
Also on Monday, the spot price of Dutch European futures on natural gas TTF (ICE Endex Next Hour) fell once to -15.78 euros, an all-time low. Settled every 60 minutes, the contract is primarily used as a risk management tool for high frequency gas traders, but is not a European benchmark.
The reason for this dramatic situation in Europe and the United States at the same time is the storage problem. Pipelines in the Permian Basin of the United States cannot be transported fully loaded, and can only be accumulated in the Permian Basin; in Europe, as the gas storage facilities of various countries are close to full capacity, a large number of LNG tankers are congested in the ports of the Spanish Sea, which cannot be unloaded.
Problems with filling
Due to sanctions against Russia, European countries have been buying natural gas globally since the summer to prepare for the following winter.
At the tireless urging of the European Union, energy companies and governments are spending huge sums of money to fill various gas storage facilities within their borders. Currently, the average level of gas storage in the EU has reached 93.4% and the level of natural gas storage in Germany has reached 97.5%.
In addition to the near-full storage levels, there is a huge amount of LNG headed to Europe.
According to statistics, Europe is expected to welcome 82 liquefied natural gas (LNG) ships this month. LNG ships ships. It is stopped outside Spanish ports because it cannot be unloaded.
This is also the main reason for the negative price of natural gas in Europe. Due to the lack of available storage, sellers are now desperate for someone to take delivery of the shipment, so they have to pay to sell it, just to get rid of it. As a result, very short-term spot prices also plummeted.
weak infrastructure
In April 2020, the price of US WTI crude oil futures for delivery next month plunged 306% in one day to close at -37 dollars a barrel. The main reason for its negative price is the severe lack of storage and unloading capacity due to the Covid-19 pandemic, forcing speculative traders to significantly reduce their long positions.
More seriously, WTI crude oil futures are often heavily traded by institutional and retail investors and are generally referred to as the reference price for US oil. However, the negative price range of TTF futures this time around is relatively small, abnormal only in high frequency traders’ futures, and next month’s TTF contract, which is the reference price, is unlikely to have negative prices.
The Dutch reference TTF natural gas price closed at 99.79 euros on 25 October, down by more than 70% compared to the year’s high of 339 euros.
While the benchmark price is positive, its price action and negative price for next hour contracts point to a huge flaw in the European gas market: infrastructure.
Although European scientists say Europe is unlikely to experience a cold winter this winter, but a mild winter, Europe will still be in a natural gas shortage until next spring. Therefore, the EU needs to store as much gas as possible, but the scary thing is that the storage capacity is nowhere near the EU consumption.
On the other hand, shipowners are still reluctant to divert to other markets, such as Asia, even though large numbers of ships are stuck in European waters. This situation may also indicate that shipowners are more convinced of the possibility of a steep rise in natural gas prices in Europe in the short term.
