Risk of more volatile gas prices in October

The repeatedly extended maintenance work in Norway and the Australian strikes continue to occupy the European gas markets this week. However, gas prices are not particularly volatile in the current month, which is typical for the month of September.

On the German THE, the front month in the current month is moving in a range of around 32-38 EUR/MWh. The monthly average of the daily quotations so far is around 35 EUR/MWh.

September with typical volatility so far

Ganexo has developed a model which shows the statistical probability of price movements on the spot and futures markets in the respective trading month. The data basis is the trading movements of the last ten years.
Thus, the upward movement of the front-month contract above the monthly average price has been a maximum of 6 percent in the current month so far. In seven of the last ten years, this has also been the maximum upward movement in the month of September. We refer to this as the 75 percent quantile.

The downward movement below the monthly average price has also been a maximum of 6 percent. Only in three of the last ten years did the front-month contract show a significantly greater downward movement in September. We refer to this as the 25% quantile.

Statistical key figures for procurement controlling

With the corridor of the 75%/25% quantile one could prognosticate thus the price movements of Oct-23 in the current month quite well. A forecast system based on statistical probabilities of occurrence can quantify risks in procurement controlling.

Apart from the analysis of the typical price movements also the estimate is essential for the energy procurement over the probability of the occurrence of only isolated price peaks and/or price crashes. This can be represented with the 95%/5% quantile.

The trading month of October shows a similar volatility for the 75%/25% quantile as the current trading month in the rear view mirror of the last ten years, but the 95%/5% quantile shows the widest corridor of all trading months. The price oscillated up to 35 percent above or below the monthly average price.

October typically more volatile

This corresponds with the usually high uncertainty in the month of October about the further course of the winter. The first signs of a possibly cold or warm winter quickly cause large price movements.

This year, too, the extremes of the fundamental forecasts are far apart. Weather developments in October and forecasts for November, the impact of the strikes in Australia, the level of LNG and pipeline supply in Europe, the war in Ukraine, the development of industrial gas demand (to name just a few factors) allow for very different market scenarios.

Accordingly, there is a wide corridor for the possible maximum and minimum price expectations in the month of October. At the current trading price for Nov-23 at 47 EUR/MWh, the 95% quantile is 57 EUR/MWh and the 5% quantile is 28 EUR/MWh.