Recently, the price of natural gas in Europe hav3 continued to rise, constantly setting new record highs with a daily increase of more than 10% frequently. But by the European trading session on Monday, the price of European benchmark natural gas futures plunged 20% to 270 euro/MWh.
Earlier on Monday, Vice-Chancellor and Federal Minister for Economic Affairs and Climate Action Robert Habeck said European gas prices were expected to fall soon, as German gas storage made positive progress, making it unnecessary to buy gas at the current high prices.
There has been a spike in natural gas prices due to strong demand and market speculation, but this speculative rally is unlikely to last long, Habeck noted. “Eventually, the market will calm down and (gas) prices will also come back down." As of the close last week, the European gas futures contract for September delivery was settled at 339.2 euro/MWh.
At an energy conference in Hamburg, Germany, Habeck announced that despite the difficult situation... natural gas storage is growing more quickly than expected, with German gas storage now reaching 83% of total capacity, and the original target of 85% by October should be achieved by the start of September.
Germany originally set a target of 75% gas storage by September 1, 85% by October 1, and 95% by November 1. Germany is now on track to complete its gas storage target of 85% of its total capacity one month ahead of schedule.
When Germany's natural gas reserves are full, they can supply 256 terawatt-hours of electricity equivalent, roughly equal to a quarter of the country's annual energy consumption, according to the German Energy Storage Initiative.
On the same day, Habeck reiterated that Germany will always ensure the liquidity of all energy companies and will not allow a shock event like Lehman Brothers to occur in its natural gas market.
The raging increase has come to an end?
But it is too early to declare the end of Europe's gas rally. Despite Germany's gas storage capacity indeed making good progress, it is not enough to keep the country well through the winter, Klaus Müller, head of Germany's energy regulator, warned on Monday.
Müller pointed out that once the supply from Russia ceases completely, even if Germany fills underground gas storage facilities to 95% of its total capacity by November, Germany's natural gas reserves will only be sufficient to support the heating and industrial facilities for about two or two months and a half. “The biggest concern now is that Russia will cut off the gas supply completely."
At present, the Nord Stream 1 natural gas pipeline that transports natural gas from Russia to Germany is only running at 20% of its maximum capacity. In order to alleviate the energy shortage, German officials have repeatedly called on the public to reduce natural gas use before winter.
Medvedev, deputy chairman of the Rusian Security Council, posted on his personal telegram channel, revising his expectations for natural gas prices. He predicts that the price of natural gas will reach 5,000 euros per thousand cubic meters (about 485 euro/MWh) by the end of the year.
Medvedev wrote: "In connection with the increase in gas prices to 3,500 euros per thousand cubic meters, I am forced to increase the forecast price to 5,000 euros by the end of 2022."
