European gas prices jumped to a record high on Dec. 21 after Russian flows to Germany through a key pipeline were halted, but then plunged by 26 percent by close on Dec. 23.
The benchmark Dutch TFI front-month gas contract (January 2022) in Amsterdam had surged to an all-time high of €170.775 per megawatt-hour by 13:00 hrs (GMT) on Dec. 21, up 16.232 percent on the previous day’s close.
However, news of a “flotilla” of U.S. liquefied natural gas (LNG) cargoes heading for Europe saw European benchmark gas prices plunge on Dec. 23. By 4:59 pm, the TFI front-month gas contract was down 27.115 percent on the day to €126 per megawatt-hour. The slump in prices continued, and prices were as low as €87.055 a megawatt-hour in Amsterdam on Dec. 30.
However, analysts said not to mistake this recent meltdown as the end of Europe’s energy woes. “Europe’s gas problem may not go away next year,” said Andrew Hill, Head of European Gas Analysis at BloombergNEF. “Geopolitical issues and acrimony with Russia, particularly around the Nord Stream 2 pipeline, will increase the scope for Russia to limit flows to Europe in the first half of the year, and potentially much longer.”
Other analysts said Europe still has to get through the winter and will need Russian gas. “LNG diversions from Asia are a useful stop-gap measure, but are not a sustainable substitute for stable pipeline supplies,” Kaushal Ramesh, a Senior Analyst at Rystad Energy, told Bloomberg.
The region remains at a “critical point,” with record low inventories, according to Goldman Sachs Group Inc. “At this rate, we have a clear risk of running out of gas if weather turns cold in the first quarter,” Damien Courvalin, the bank’s Head of Energy Research, told Bloomberg. “Volatility will remain high.”