The decline in stock prices for gas in Europe is the calm before the storm

Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance, commented to RIA Novosti on the current decline in exchange prices for gas in Europe.

“I would call the current situation the calm before the storm. It is obvious that prices will return to growth during the heating period. This can be seen in December and January futures, which are still 35-45% higher than November,” Belogoriev says.

At the same time, the expert notes that now no one can predict what kind of "storm" this will be. "It depends on a complex and very precarious balance of supply and demand for gas," he points out.

The price cut reasons

According to Belogoryev, the decrease in exchange prices for gas in the EU, observed since the end of September, is associated with four main factors. First, there is a favorable balance in the gas market. Thus, stocks in storage facilities are high, UGS facilities in the EU are 93.4% full on average. It is expected that by the beginning of the selection season, the figure will reach 94-95%.

"The second factor is calming weather forecasts for November-January. According to the authoritative European Center for Medium-Range Weather Forecasts (ECVWF), the temperature in Europe in the next three months is expected to be at or even above the long-term averages. And the dynamics of gas prices during this period of the year is traditionally extremely sensitive to weather forecasts," the expert says.

Thirdly, according to Belogoryev, market participants to a certain extent overcame the panic that prevailed from May to September. Current estimates, including Russian ones, show that it is risky, but possible for Europe to go through the heating season without Nord Stream, which was out of order as a result of terrorist attacks, and even earlier - Western sanctions.

Finally, a little more cautiously, but a fourth factor can be singled out - this is a decrease in pressure on the gas derivatives market from financial speculators, Belogoryev believes.

“They are deterred by both the general tightening of monetary policy, including in the eurozone, and the discussed plans of the EU to introduce a so-called dynamic cap (that is, an upper ceiling) on ​​exchange prices on the TTF hub. This is not a key factor, but it is also likely to plays its role," the expert concludes.