Analysts doubt that European countries will be able to cover their natural gas needs this coming winter. Russian supply cutoffs will help see to that. [Reuters]
The continuing rally in natural gas is spreading panic across Europe.
After six weeks of uninterrupted increase, the price at the Netherlands’ Title Transfer Facility (TTF) futures market, a benchmark for the European market, rose Thursday as high as €319.90 per megawatt-hour, before settling at €313.0/MWh late in the day, a 554.6% rise since September 2021. Futures contracts point to an extremely challenging winter, with prices around €315.90/MWh for the fourth quarter of 2022 (October-December) and over €300/MWh until February 2023.
Electricity wholesale prices are consequently at sky-high levels, over €700/MWh, with Italy steadily leading the way (€716/MWh currently), and Germany, not far behind, at €711.78/MWh.
Portugal and Spain, which have imposed a hard ceiling on prices, are the exceptions: The electricity price per megawatt hour in Spain is currently €175.33. Poland, due to carbon dioxide rights sales has a price of €352.39. Bulgaria and Greece, normally among the most expensive markets, currently hover slightly above €400/MWh.
With the notable exception of Italy, Southern European countries appear more resilient in the face of the energy prices. Their relative lack of cross-border power grid connections, normally considered a liability, has become an advantage.
The exploding electricity prices in the more advanced, better networked European countries, was not only due to the natural gas rally. France’s reduced nuclear energy output has led to an explosion in futures prices, with December contracts at €1,500.
The interconnected Greek and Bulgarian markets did not take advantage of nuclear-generated French electricity when it was cheap. Now, their markets will not suffer excessive pressure.