Source: Xinjing News

Author: Xu Lifan

Since the outbreak of the Russian and Ukraine conflict, the price of natural gas in Europe has reached nearly 350 euros per mega.However, due to multiple factors, from December 19th to 23rd, the price price of the reference natural gas futures in Europe fell sharply, a cumulative decrease of 26.40%a week.

The Dutch TTF Natural Gas in January 2023 closed at 84.98 euros per MWh time. Compared with the highest point this year, the price plummeted 400%, and all the increases since the outbreak of the Russian -Ukraine conflict in February this year.Falling to the level before the outbreak of the Russian and Ukraine conflict.

The explosion of the main natural gas pipeline "Beixi 1" in Russia's main natural gas pipeline "Beixi 1" has not yet been clarified, and sanctions on Russian energy have not relaxed. The price of natural gas in Europe has dropped sharply. What happened?

output atrophy inhibit the demand for natural gas

Since the outbreak of the Russian and Ukraine conflict, major European countries have appeared in a relatively serious energy crisis.

The direct consequence of the

Energy crisis is that the cost of manufacturing has risen sharply, leading to shrinking industrial output.The clear indicator of the shrinking of industrial output is the manufacturing PMI and the service industry PMI (purchasing manager index).

Since July this year, the euro zone manufacturing PMI has been lower than the "Rongku Line" for six consecutive months (the critical value of the PMI and the entrepreneurial confidence index).Although the PMI of the euro area service industry in December has risen to 49.1, which is a new high in the past four months, from the perspective of the new order volume in December, the number of new orders in the euro zone manufacturing industry has declined for the eighth consecutive month, and the number of new orders in service industry orders has been decreased.The 6th consecutive month decreased, but because of the Christmas fake factors, the decrease was slowed down from the previous few months.

In European countries, Germany, the Netherlands, and Spain performed the worst performance, and they all showed signs of atrophy.Like Germany, chemical giant BASF has announced that it will "permanently" reduce the production scale in Europe as soon as possible.

This has formed a cycle: the energy crisis suppresses economic output. Conversely, the shrinking of economic output has inhibited the demand for natural gas in Europe. This is the fundamental aspect of natural gas prices in Europe.

Set the upper limit of natural gas prices that suppress the futures fried

Another important reason for the plunge in the price of natural gas in Europe is that on December 19, local time, the Energy Minister of Energy of European countries reached an agreement: If the price and price of the EU's major trading centers remained at 180 euros/Suma time for three consecutive days,The upper limit of the implementation -the 19th is the time when the price of natural gas in Europe began to plummet.

This agreement is stricter than the upper limit set by the European Commission at the beginning of 275 euros/sum times.The upper limit of 180 euros also caused the market to lose room for the price of fried natural gas futures.

The shrinking of industrial output and the upper limit of the price of natural gas is the two major reasons for European natural gas prices.In addition, other factors have also played a role in boosting.

For example, public information shows that natural gas inventory in major European countries once reached more than 94%of nearly saturated, and now it consumes some, 83%.

This is a dangerous signal for speculators in the futures market: if you must buy the spot natural gas at the end of gambling, you will not find a place to place it.Earlier, a large amount of LNG imported from the United States from the United States, due to the insufficient receiving facilities, caused the liquefied natural gas to the Hong Kong to reduce prices to get off.

In addition, Europe has caught up with a warm winter this year, which also caused futures speculators to reduce expectations.

Can't do it completely with Russia to "break the breath"

Although the price of natural gas in Europe has now fallen to the level before the outbreak of the Russian -Ukraine conflict, it also needs to be seen that the price of the energy market is quite unstable.The decline in the price of natural gas in Europe has not formed a trend.

Another noteworthy signs is that although Russia's "Beixi" pipeline that exports to Europe cannot run now, some European countries are very determined to cut off the contact with Russia's energy.But in fact, in this year, Europe has quietly imported a large amount of liquefaction natural gas from Russia.

According to Russian data, from January to November this year, European LNG's imported natural gas imports increased by 40%from the same period in 2021 to 19.4 billion cubic meters.As the "enemy" of the European Union, Russia is still the second largest importer of European liquefaction natural gas, accounting for 16%of its share, second only to the United States.

This also shows that it is difficult for Europe to cut off the trade connection with Russia and other energy sources with Russia.

Russia has also been released to continue and expand signals to export natural gas exports to Europe.Including the re-enabled "Amal-Europe" pipeline to restore natural gas supply to Europe. This pipeline has not exported natural gas to Europe since December 2021 due to Poland's attitude.In addition, Russia also plans to push into Europe through the Turkish "Turkish Creek" pipeline. This pipeline currently only uses 40%of traffic.

There is no doubt that Russia regards natural gas as one of the tools to improve geopolitics.The question is whether Europe can insist on saying "no".Europe has gradually realized that the US inflation reduction bill may empty the European industry and force European companies to turn to the United States.Perhaps in the future, Europe will also import Russia's natural gas as a tool to fight back in the United States.