empty
31.01.2025 12:49 AM
Why Is Gas Becoming More Expensive?

Gas prices are rising again. The benchmark Dutch TTF gas contract has surged to €52.37 per megawatt-hour, marking its highest level since October 2023. Given the current fundamental backdrop, this upward trend is likely to continue.

This image is no longer relevant

Firstly, weather conditions are driving an increase in gas prices as temperatures are getting colder in Europe. According to the mid-term forecast, starting Friday, temperatures will gradually decrease. In Germany, for instance, nighttime temperatures are expected to drop to minus 5-6 degrees Celsius, while daytime temperatures will range from 2-5 degrees Celsius. Next week, Central Europe can expect daytime temperatures to fall to 0-1 degrees Celsius, with several capitals experiencing temperatures below zero. This indicates a significant rise in demand for heating in the coming days.

Additionally, forecasters predict a decrease in wind strength, which will lead to reduced energy output from wind turbines. This expected decline in wind power generation will further contribute to the rising cost of natural gas.

Secondly, gas prices are also increasing due to the suspension of operations at three Norwegian gas fields. Recently, the Norwegian gas operator Gassco reported several unplanned shutdowns at the Troll, Karsto, and Asgard fields, which are experiencing technological issues that could significantly impact production levels.

The third reason for concern is the significant outflow of gas from European storage facilities. According to Gas Infrastructure Europe, European gas storages are currently 55.25% full. For comparison, at the end of January last year, these storages were filled to 72%. The current level for 2024 is comparable to the end of the gas withdrawal season (March 31), when 58.44% of reserves remained in storage. Although the withdrawal rate has slowed down in recent weeks due to milder temperatures and windy weather, the situation could change soon with expected colder weather on the horizon.

Is a 55.25% occupancy rate of gas storage facilities substantial or minimal? In Germany, there is a law that requires gas storage operators to ensure that their facilities are at least 30% full by February 1 each year. This level of filling is deemed adequate to conclude the heating season without interruptions by March 31, allowing for sufficient gas storage refilling during the summer months for the upcoming fall and winter. Therefore, the current level of gas storage in Europe (55.25%) is not critical. In Germany, specifically, gas storage facilities are filled to 57%. According to projections, even in the worst-case scenario—such as extremely severe cold weather—the reserves of natural gas are expected to reduce to about 20% by April.

The situation described is primarily theoretical, while the market is focused on the facts. Currently, the data indicates that the reserves in EU gas storage facilities are declining more rapidly this fall-winter season than in previous years. Notably, on January 29, 2024, the EU's gas storage facilities were reported to be 75% full. Analysts believe this decline is due to a combination of factors: the termination of Ukrainian gas transit, lower temperatures, and prolonged periods of calm weather.

These factors are expected to continue influencing the market in the medium term, which suggests that upward price pressure will persist. For instance, supply uncertainty remains a significant issue. Reports indicate that there are currently no substantial negotiations regarding the transit of Azerbaijani gas through Ukraine. Additionally, experts note that for Azerbaijan to significantly increase its gas exports to Europe, it must either boost production or redistribute its existing domestic consumption.

As a result, the current information background points toward a potential increase in the price of "blue fuel", expected to reach a range of 55-60 euros.

Irina Manzenko,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

AUD/JPY: Analysis and Forecast

The AUD/JPY pair's rate is attempting to hold slightly above the 94.00 level, its lowest point since September 2024. Investors are increasingly confident that the Bank of Japan (BoJ) will

Irina Yanina 11:19 2025-02-27 UTC+2

The Market Lacks Momentum

NVIDIA's earnings report lacked the necessary spark, and the S&P 500 plunged after an initial rally. Meanwhile, Donald Trump's threat of imposing 25% tariffs on the European Union

Marek Petkovich 09:49 2025-02-27 UTC+2

Markets Are in a Pre-crisis State Due to Trump's Policies, With a Potential Decline in the EUR/USD Pair and a Rise in USD/CAD

Donald Trump continues to create confusion regarding tariff policies, which significantly impacts financial market dynamics. Recently, he postponed the implementation of previously announced tariffs for Canada and Mexico from March

Pati Gani 08:42 2025-02-27 UTC+2

What to Pay Attention to on February 27? A Breakdown of Fundamental Events for Beginners

Thursday's macroeconomic calendar is relatively light, but significant reports will be released today. Germany, the UK, and the Eurozone are set to publish minor economic reports, which are not expected

Paolo Greco 06:32 2025-02-27 UTC+2

GBP/USD Pair Overview – February 27: The Spring is Compressing for the Pound

The GBP/USD currency pair continues to rise, despite lacking strong justification for its movement this week. In the first three days, no significant reports have been released

Paolo Greco 02:43 2025-02-27 UTC+2

EUR/USD Pair Overview – February 27: Is There Anything to Analyze?

On Wednesday, the EUR/USD currency pair continued to trade very calmly, as the market lacked significant fundamental and macroeconomic indicators, with only a few minor events taking place. Market participants

Paolo Greco 02:43 2025-02-27 UTC+2

EUR/USD Trapped in a Range: The Pair Trades Within a Narrow Price Range

For the third consecutive week, EUR/USD has been testing the 1.0500 level, but it continues to struggle to consolidate above this target. Traders are frozen in anticipation

Irina Manzenko 23:31 2025-02-26 UTC+2

The Dollar Is Following a Familiar Trajectory

To predict the future, it's essential to examine the past. The behavior of the US dollar after the presidential elections in November is strikingly similar to its movements during

Marek Petkovich 23:09 2025-02-26 UTC+2

Oil market on verge of collapse. Can Brent hold above $70?

The oil and gas market is expected to trade with high volatility in the near future. Oil remains under pressure, and its ability to stay above $70 will depend

Anna Zotova 12:49 2025-02-26 UTC+2

Have the Worst Times Arrived for the Cryptocurrency Market? (There is a possibility of further declines in gold and Bitcoin prices after an attempted upward correction)

Since Donald Trump's victory in the presidential race last November, the majority of significant cryptocurrency tokens have either sharply corrected downward or entered a consolidation phase within a sideways range

Pati Gani 11:09 2025-02-26 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.