The drop in European gas prices to moments below EUR 40 per MWh is driven by news of record storage levels of this energy source at 56% across the EU (64% in Germany), which is two to three times higher compared to April last year. All this will facilitate the remaining procurement of 445 TWh of gas to reach critical stock levels for the next winter, which is significantly less than the 780 TWh estimated for procurement by early November last year.
This significantly reduces the pressure on LNG capacities, where gas was panic bought at any (record) price last summer. However, at current price levels, no further drop is expected as lower prices would redirect gas to Asia, particularly to China. Fortunately, the opening of a key LNG terminal on the U.S. side of the Gulf of Mexico (closed after an explosion in mid-2022) will contribute to record U.S. gas exports through LNG channels and stabilize the markets.
Accordingly, gas price forecasts for the second half of the year are falling to EUR 70-75 per MWh. The main risk is a complete interruption of Russian gas supplies to the EU, which could push gas prices to EUR 100 per MWh. The decline in wheat prices continues towards EUR 250 per ton despite Russian threats to suspend exports of this agricultural commodity through Ukraine. If this occurs, the supply of Ukrainian wheat will significantly decrease, a situation recently exacerbated by import restrictions from Poland and Hungary until the end of June to protect producers from a sharp price drop.
