This is a significant drop, because at the end of August the price of these contracts reached a record 350 EUR / MWh. There were several reasons, but mainly related to Russia’s policy of turning off the gas tap in the Nord Stream 1 pipeline. Limited supply met with increased demand, as European consumers are trying to fill their warehouses before winter, and at the same time there were problems with generating energy from other sources ( coal shortages, low water level, which hinders its transport and cooling of nuclear power plants).
On Friday, European energy ministers in Brussels will discuss special measures to contain rising energy costsfrom natural gas price caps to the suspension of trading in energy derivatives.
Russia’s recent decision to the suspension of gas supplies to Germany via the Nord Stream 1 gas pipeline has stepped up pressure on EU officials to contain the rise in gas prices and avoid social upheaval as the winter season approaches.
Belgian Prime Minister Alexander De Croo warned on Thursday that Europe must take immediate action to deal with the energy crisis.
“We do not think that Europe will be forced to rationing natural gas extensively this winter, as the very high price should result in obtaining enough LNG from abroad to replace smaller fuel imports from Russia,” Capital Economics analysts write in a market note. However, they add that there are some risk factors that could significantly reduce gas stocks in the EU.
There are voices for the EU to suspend the implementation of certain elements of the climate policy and the carbon rights trading system. The Polish government’s proposal is a price block for CO2 emission rights at EUR 32, although Prime Minister Morawiecki talked about even 20-30 euro. The market may assume that this program has a chance of being implemented. And that would limit the demand for gas, increasing the consumption of coal. This would mean a greater chance of opening coal and lignite-fired power plants and combined heat and power plants, and would lower the price of energy and heat.