Germany Optimistic About Achieving Gas Storage Targets as European Gas Futures Prices Plunge 17%

Closed Trading at 282 Euros per MWh... Dropped to 268 Euros Intraday

[Asia Economy Reporter Park Byung-hee] European gas prices plunged on the 29th (local time) after the German government issued an optimistic outlook on achieving its gas storage target for this winter.

On that day, the September delivery natural gas futures price at the Netherlands TTF exchange closed at 282 euros per megawatt-hour (MWh), down 16.9% from the previous trading day. Until last week, natural gas futures prices had risen for six consecutive weeks, with the closing price on the 26th at 339.2 euros per MWh. During the session, natural gas futures prices fell to around 268 euros per MWh, and Bloomberg reported that the intraday natural gas futures price dropped more than 20%, giving back much of the gains made in recent weeks.

Optimism that Germany’s natural gas supply issues may not be severe led to the sharp decline in natural gas prices.

Robert Habeck, Germany’s Vice Chancellor and Minister for Economic Affairs, stated on the 28th that Germany’s gas storage level is currently at 82.2%, and he expects to reach the initial target of 85%, originally set for October, by early September. Germany plans to raise the storage level to 95% by November.

There have also been analyses suggesting that recent European gas futures prices have risen excessively. Goldman Sachs released a report on the 26th indicating that European gas prices appear to have risen excessively.

EnergyScan, a subsidiary of the French energy company Engie, predicted in a report released on the 29th that prices would fall as profit-taking movements emerge following six consecutive weeks of rising gas futures prices. EnergyScan also forecasted that as gas inventories fill up, the momentum behind gas price strength would weaken. Bloomberg reported that as of the 27th, the EU gas storage level was 79%.

As natural gas futures prices plunged, electricity prices also sharply declined.

Bloomberg reported that the German electricity futures price for delivery next year, traded on the European Energy Exchange, plummeted 29% that day. Early in the session, following the trend of a more than 25% surge on the 26th, prices had surpassed 1,000 euros per MWh for the first time ever. According to Bloomberg, at 10:19 a.m. local time in Germany, the German electricity futures price was 1,050 euros per MWh, up 6.6% from the previous trading day, but then plunged sharply along with natural gas futures prices.

Following Germany, French electricity prices, which had surpassed 1,000 euros per MWh on the 26th, also turned to a sharp decline.