New gas contracts that are now being concluded for the coming years will demand higher prices up to 2026 than were usual a year ago. Since March, the costs have also increased significantly, even for long-term contracts.
When a German company signs a new gas contract today, the prices are usually fixed for several years. This is a trading process. Both the customer and the gas supplier have to estimate how expensive natural gas will be in the coming years – and set prices accordingly. Increasingly higher prices are being asked for in the years to come. It is becoming clear that gas suppliers and companies are assuming that the energy crisis will last even longer than previously thought.
This is shown by a statistic from the financial news agency Bloomberg. According to this, the average delivery price per megawatt hour of gas – which corresponds to around 95 cubic meters – in Europe at the beginning of July was 182.30 euros. According to the data from new contracts concluded by the end of March, it was to be assumed that this price would fall to 64 euros per megawatt hour by July 2023. But that’s passé. New data shows that the price will still be around 132 euros in a year. According to new data, the curve flattens out more flatly than previously assumed in the years that follow. The gas price in July 2024 would still be 80 euros per megawatt hour instead of 46 euros and in July 2025 it would now be 45 instead of 35 euros.
This also pushes back the point in time when gas prices reach the level they were before the start of the energy crisis last summer. At that time, a megawatt hour was traded for around 34 euros on the TTF trading platform in the Netherlands, which is crucial for Europe. Bloomberg does not expect such a price until the summer of 2026.
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The only good news: We seem to have peaked in gas prices. In March, a few weeks after the outbreak of the Ukraine war, prices rose to 227 euros per megawatt hour. On Friday, trading on the TTF closed at around 190 euros, around 16 percent lower. Most recently, concerns about a blockage of the Nord Stream 1 Baltic Sea pipeline had caused prices to rise. Most recently, Russia throttled deliveries to just 20 percent of the pipeline. However, operator Gazprom also loses many billions of euros in profit with such a measure.
However, the price forecasts for the coming years are independent of such short-term events. When the current TTF prices rose to 227 euros in March, it only went up to 155 euros for deliveries in December this year. Although current spot prices have fallen since then, December deliveries have remained at a level of 190 euros per megawatt hour. The prices therefore do not reflect current events, but the expectations of dealers, suppliers and customers.
When it comes to the European gas market, they don’t look rosy. Natural gas remains a means of political pressure between Russia and the EU states in both directions. While the Russians are threatening to stop deliveries and have already cut deliveries, the EU countries are desperately looking for alternatives to Russian gas, which could only come into their own in a few years.
Even an immediate end to the war in Ukraine would hardly defuse the situation. However, the higher prices for future contracts also reflect the fact that industry insiders are not expecting this to happen any time soon.
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