The volatility of gas prices continues, exceeding 40 euros per MWh from summer lows of 25 euros per MWh. This volatility is largely due to threats of strikes at LNG terminals in Australia, despite a collective wage agreement reached last week at a major LNG platform. The issue lies with two large LNG platforms that account for more than five percent of the world’s gas export supply via LNG channels, according to HUP’s analysis Focus of the Week.
While reduced gas deliveries via LNG from Australia remain ‘only’ a risk, the decline in gas supply from Norway is already a fact. Deliveries of gas from the leading European gas supplier have fallen to the lowest level in over a year after routine maintenance work began at a major gas field in the North Sea.
Fortunately, European gas storage facilities are already sufficiently filled and can mitigate any short-term supply disruptions. According to Gas Infrastructure Europe, the average filling level in the EU is already above 92 percent – the highest level at this time of year since 2019. Last year, this filling level was only achieved in mid-October. This should curb the rise in gas prices unless there are greater geopolitical instabilities.
According to a survey by the Ukrainian Ministry of Agriculture, local farmers plan to plant less wheat and barley, and more rapeseed. Although this certainly worsens the prospects for next year’s wheat harvest, wheat prices are currently not reacting as long as Ukraine manages to export its grains via alternative transport routes despite the closure of the grain corridor through the Black Sea.
The consequent rise in logistics costs, along with the recent drop in wheat prices, negatively affects producer margins and reduces the motivation to increase production. Meanwhile, five Eastern EU member states – Bulgaria, Poland, Hungary, Romania, and Slovakia – continue to insist on extending the ban on imports of Ukrainian grains, which has been in effect in their countries since May and will remain in place until September 15, through the end of the year.
As they simultaneously advocate for subsidies for the transit of Ukrainian agricultural products, the impact on grain markets could be limited. Romania’s efforts to significantly increase the capacity for shipping Ukrainian grain at Black Sea and Danube ports should contribute to a decline in wheat prices.
