European Gas and Power Prices Fall

European gas and power prices continued to fall last week due to uncertainty on how the potential EU market intervention will impact the market, Rystad Energy Senior Analyst Fabian Ronningen said in a market note sent to Rigzone late Monday.

“The largest fall can be found in the UK, with a large decline of 43 percent last week compared to two weeks earlier, with an average of EUR 343 [$348] per MWh,” Ronningen said in the note. 

“This large fall has been caused by lower gas prices in addition to stronger wind supply in the UK and on the continent,” the analyst added.

“Italy remained the most expensive market, but also here a significant fall was seen, with a weekly average of EUR 469 [$476], a reduction of 28 percent compared to two weeks before,” the analyst continued.

Ronningen highlighted that the TTF continued to fall for the majority of last week, “despite no return of Russian volumes through Nord Steam 1”. 

“NS1 is not expected to return anytime soon either, which should provide a strong bullish signal,” Ronningen said.

“This has been outweighed by the uncertainty among market participants on the potential impacts of possible EU market interventions, in addition to very healthy storage levels across Europe,” he added.

Ronningen pointed out that the TTF spot price ended the week at EUR 191.7 [$194.5] per MWh, “a 42 percent decline since the peak”. The TTF front-month has been on a similar trajectory as the spot market, Ronningen noted. 

Will Bullish Sentiment Continue?

It is unclear if this bullish sentiment in the gas and power market will continue, as a lot of the uncertainty lingers on the EU discussions on market intervention, Ronningen said in the note.

“European Union energy ministers met on Friday to discuss measures to curb electricity prices in the EU,” Ronningen stated.

“An outcome of the meeting was that Brussels was tasked with drafting a proposal to cap revenues of non-gas energy producers and use the revenue to reimburse consumers. The ministers backed away from a Russian gas price cap but held the door open for a general price cap on gas, regardless of the source,” he added.

“The final proposal is set to be unveiled … Tuesday and energy ministers are planned to meet later this month to negotiate and approve the final plans,” Ronningen continued.

Ronningen went on to note that the continued discussions on market intervention are expected to be the dominant factor this week, and going forward for gas, power, and carbon in Europe.  

Lowering the Cost of Gas

In a statement made on September 7, European Commission President Ursula von der Leyen said, “we aim at lowering the costs of gas”.

“Therefore, we will propose a price cap on Russian gas. Of course, the objective is here very clear. We all know that our sanctions are deeply grinding into the Russian economy, with a heavy negative impact, but Putin is partially buffering through fossil fuel revenues,” von der Leyen added in the statement.

“So here, the objective is - we must cut Russia’s revenues … And now our work of the last months really pays off. Because, at the beginning of the war, if you looked at the imported gas, 40 percent of it was Russian gas, since a long time. Today, we are down to nine percent only,” von der Leyen continued.

In the statement, von der Leyen noted that “these are tough times, and they will not be over soon”.

“But I am deeply convinced that, if we show the solidary, the unity and we have the determination for that, we have the economic strength, we have the political will, that then we shall overcome,” von der Leyen added.

To contact the author, email andreas.exarheas@rigzone.com