The price of the megawatt hour (MWh) of gas in the Iberian Gas Market (Mibgas) marked a price of 27.78 euros yesterday, Wednesday, and this Thursday it is trading at 36.6 euros. References that have not been so low for almost a year and that fall below 40 euros for the first time since June 15. It was on that date that the Iberian exception mechanism began to work, by which Brussels allows Spain and Portugal to limit the price of gas for electricity generation, establishing a cap of 40 euros per MWh during the first six months. Subsequently, an average of 48.8 euros is set for six more months.
This means that currently below the limit of 40 euros the aforementioned mechanism is not applicable and it is not necessary to make compensation for the difference. In other words, for the first time since its approval, the Iberian mechanism will be deactivated this Thursday and, if nothing changes, also in the next few days. The weekend is listed at 26.50 euros MWh.
The development of the rule that launched it already provided for this possibility, so the suspension is automatic, and its reactivation will also be automatic as soon as the MWh price on the Mibgas market exceeds the threshold of 40 euros again. In the futures market, the rest of October gas is trading at 75 euros MWh and November is at 64.6 MWh, but the situation becomes more complicated again for next year with averages above 110 euros.
Behind this conjunctural 'exception of the exception' there are multiple reasons. On the one hand, the abnormally high temperatures this fall. This is delaying the need for heating in European homes, thus detracting from demand and increasing gas savings. In addition, the wind is also becoming stronger, favoring a greater production of wind energy.
On the other hand, the fear of a gas supply cut by Russia has prompted all European countries to do their homework in terms of increasing reserves to the point that most are above 90%. It is not about the gas, the problem is that there is a lack of storage capacity. On Monday, Reuters reported that at least 35 methane tankers (those that transport Liquefied Natural Gas, LNG) are sailing off the Spanish coast "unable to secure spaces to unload." He also added that another 12 methane tankers would be in a similar situation on other European coasts.
In fact, the price of natural gas in the Dutch market, TTF, a reference in Europe, has accumulated four days of declines to 119.5 euros per MWh that it marked on Wednesday, a level not seen since last month of June, after having marked maximums of 350 euros MWh last August.
Financial sources explain that investors are not only discounting Europe's storage problems, but are also taking into account that the forthcoming recessions announced in countries such as Germany will detract from consumption. The saving policies that are being approved in the majority of central and southern European countries will also do so, as they point out. “In fact, part of the drop in prices in recent days also has a lot to do with doubts about what Europe can approve at Thursday's summit. If there is a joint purchase, it is clear that this will put downward pressure on the price, which is why many traders have left the market to avoid that risk,” they say.
