Gas prices on European gas exchanges have continued to rise in recent weeks. Prices were already unprecedented at the time of our latest market review in October, and no one anticipated the market prices we are seeing now.
Currently, on 22 December 2021, the forecast TTF Front Month gas price for January 2022 is approximately EUR 116/MWh, compared with a long-term average of around EUR 20/MWh. Intraday fluctuations on European exchanges are also substantial, reaching EUR 15–20/MWh per day.
Gas procurement in Finland is based on these European price indices, of which the Dutch TTF is by far the most widely used. This unprecedented exchange price level is therefore directly reflected in customers’ gas bills.
Several factors explain the price level
The main reasons for rising gas prices remain the same as earlier in the autumn. European gas storage levels are still low, and withdrawals continue to exceed injections.
Less gas has arrived in Europe from Russia than is normal for this time of year, as Russia has been filling its own storage and has not booked the usual amount of gas transmission capacity to Europe.
More LNG has recently arrived in Europe than earlier in the year. However, this has not been enough to remedy Europe’s storage situation. Prices for emission allowances, coal and electricity also remain high.
No relief expected early in the year
In December, gas prices rose even more sharply than in November, partly because the Nord Stream 2 pipeline approval process was suspended. Heightened tensions in Ukraine and their potential impact on Russian gas trade are also likely to explain the significant price change.
The high prices recorded in December directly affect January prices, because the TTF Front Month price, for example, is based on the previous month’s price quotations.
Unfortunately, no immediate relief in the size of gas bills is therefore expected at the start of the year.
Gas prices are expected to fall later in 2022, as the forecast curve above shows. However, gas customers should prepare for this winter’s bills to be exceptionally high by historical standards.
The end customer’s gas price includes more than the exchange price
It is worth remembering that the price paid by the end customer includes components other than the gas procurement cost based on exchange prices.
For example, natural gas tax will remain at this year’s level next year, and the forthcoming biogas tax will still not apply to industrial or heating use.
The SK index and price fixing provide protection for our customers
Our own SK index, introduced at the start of 2021, has performed well. It has brought stability to our customers’ gas prices despite the large exchange price fluctuations over the year.
The SK index price is formed by fixing gas prices during the three months preceding the delivery month. We also publish the index one month before the gas delivery month begins. By contrast, the Front Month gas price based directly on TTF prices is only known at the start of the delivery month.
The SK index is particularly suitable for consumers and small and medium-sized industrial users. For customers consuming more than 5 GWh a year, we offer flexible price fixing.
For more information about price fixing, the SK index, the market situation or our services, please contact our sales team.
Further information:
European gas market prices can be followed on the Intercontinental Exchange (ICE) website, among other sources. For example, you can view TTF forward prices (EUR/MWh).