Gas price falls towards this year's low. Stocks, however, lower than in the past two years

The price of natural gas on the European benchmark contract is at its lowest level in the past three weeks, according to the latest data from the TTF trading hub. Gas is currently trading at around 33 EUR/MWh. Higher gas supplies, both by pipeline and in liquefied form, have helped drive prices lower. However, gas storage facilities are still less full than in the past two years. 

The price of natural gas for the following month on the benchmark contract has only exceptionally been lower than it is now this year. A MWh can currently be purchased on the wholesale market for around 33 EUR. Prices were lower only at the end of April and June. Current prices are approaching this year's low – the lowest price at which natural gas could be bought on the exchange this year was around 31 EUR/MWh.

The main reason for the price decline is high gas supplies to Europe, both by tankers in liquefied form and via pipelines, according to Bloomberg. Supplies of gas in liquefied form have been at record levels in recent months. In every month this year from February to June, imports of liquefied natural gas into European terminals were the highest in history. July is also heading for a record, although data for this month are not yet complete.

Lower demand for liquefied natural gas in Asia is also contributing to lower prices. Despite higher temperatures, demand has not risen as much as analysts expected. This has also allowed more tankers to deliver natural gas to Europe. If liquefied natural gas imports remain at levels similar to those seen so far, total annual imports could rise by as much as a quarter.

Thanks to high LNG supplies, European gas storage facilities are also gradually filling up. Their fill level is one of the main indicators of future natural gas prices ahead of the heating season. European storage facilities are currently around 65% full, roughly at the level of 2022 at this point in time; they ultimately reached 95% before the heating season that year.

The European Union still requires European storage facilities to be at least 90% full by 1 November each year. The European Parliament is currently discussing an adjustment to this target to make it more flexible. If the amendment to the relevant regulation is approved, the 90% filling target may be reached at any time between 1 October and 1 December. Interim storage-filling targets will be indicative only, which should give market participants greater flexibility to purchase gas during periods of more favourable prices.