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Copying my answer from another comment: The spot price is about supply and demand over an extremely short time period and has dipped below zero because at the

by remus 4y ago

Copying my answer from another comment: The spot price is about supply and demand over an extremely short time period and has dipped below zero because at the moment gas storage in europe is very full, so if you've got a load of natural gas to sell no one is buying because there's nowhere to put it. This is probably related to unseasonably warm temperatures in Europe at the moment, so people are using less gas than expected to heat their homes. The high prices you pay as a homeowner are to do with high expected demand over to winter relative to the available supply, because the supply has been seriously reduced due to the war in Ukraine.

hef19898 4y ago
Also, gas providers filled up storage and secured volumes at high prices. Even if they now buy for way less, customer prices will be an average (at least, depending on exactly how providers calculate costs and thus prices) of those two. So until the old inventory is consumed, consumer gas prices won't move a lot. Overall, this is good. As a consumer you want stable prices and not depend on spot and future markets fluctuations.
- jandrese 4y ago
  This is a classic market shock panic buying. Something newsworthy happens that will reduce the availability of some commodity rising prices slightly, the reaction is that people start trying to stockpile the commodity which further stresses the market and drives prices even higher, fueling more fears about shortages, and so on. Then the storage fills up and it wasn't really that big of a shortage in the first place so the demand utterly collapses. It's the same thing that happened to toilet paper back in early 2020. I only hope this accelerates the transition to renewable energy sources in Europe.
matai_kolila 4y ago
Can I take a stab? If I just so happen to have decent storage capacity for this gas I could make a killing, except if I did have that storage, I would have already had long term contracts to fill that storage/keep it full given the uncertainty in Ukraine so there's not really any place for this gas to go, but they're still producing the gas and it's hard to just stop doing that so for a little bit the gas companies were willing to pay people to get this gas off their hands to make room for the new gas they were pumping out. Right?
- bluGill 4y ago
  Almost. If you had long term storage you would be following the market yourself. There is a good chance that you are the one who paid for this gas months ago when it left port, expecting to sell the gas you currently have in storage and refill it with shipments arriving today. So odds are you lost money today. Note that the above was a good and reasonable bet to make. You should have already known the risk that this would happen and so are not surprised. You still expect to make money of the year, just not as much.
  - matai_kolila 4y ago
    Okay, that makes sense. Do people in these situations try to come up with on-demand storage at all, or is that not reasonable given the difficulty of storing natural gas? Like, could you try and load up your idle fleet of containers (truck, ship) on the cheap or are we past that now, hence the negative price?
    - Denvercoder9 4y ago
      Any reasonably-sized storage has already been contracted out in advance, and improvising additional storage capacity isn't really viable given the amounts of gas we're talking about and the environmental laws storage has to comply with. However, what has happened in the past for oil is tanker ships anchoring with a full load just offshore until they can sell the load for a good price. I don't know whether that's also feasible for LNG though, given the boiloff concerns.
      - matai_kolila 4y ago
        Yeah that's what I was thinking, but also using trucks that are for short-term transport as longer term storage could be possible to make a quick buck, but I bet anyone that can do that is doing that heh (or can't if it's not feasible technically).

by remus 4y ago

hef19898 4y ago

Also, gas providers filled up storage and secured volumes at high prices. Even if they now buy for way less, customer prices will be an average (at least, depending on exactly how providers calculate costs and thus prices) of those two. So until the old inventory is consumed, consumer gas prices won't move a lot. Overall, this is good. As a consumer you want stable prices and not depend on spot and future markets fluctuations.

jandrese 4y ago
This is a classic market shock panic buying. Something newsworthy happens that will reduce the availability of some commodity rising prices slightly, the reaction is that people start trying to stockpile the commodity which further stresses the market and drives prices even higher, fueling more fears about shortages, and so on. Then the storage fills up and it wasn't really that big of a shortage in the first place so the demand utterly collapses. It's the same thing that happened to toilet paper back in early 2020. I only hope this accelerates the transition to renewable energy sources in Europe.

matai_kolila 4y ago

Can I take a stab? If I just so happen to have decent storage capacity for this gas I could make a killing, except if I did have that storage, I would have already had long term contracts to fill that storage/keep it full given the uncertainty in Ukraine so there's not really any place for this gas to go, but they're still producing the gas and it's hard to just stop doing that so for a little bit the gas companies were willing to pay people to get this gas off their hands to make room for the new gas they were pumping out. Right?

bluGill 4y ago
Almost. If you had long term storage you would be following the market yourself. There is a good chance that you are the one who paid for this gas months ago when it left port, expecting to sell the gas you currently have in storage and refill it with shipments arriving today. So odds are you lost money today. Note that the above was a good and reasonable bet to make. You should have already known the risk that this would happen and so are not surprised. You still expect to make money of the year, just not as much.
- matai_kolila 4y ago
  Okay, that makes sense. Do people in these situations try to come up with on-demand storage at all, or is that not reasonable given the difficulty of storing natural gas? Like, could you try and load up your idle fleet of containers (truck, ship) on the cheap or are we past that now, hence the negative price?
  - Denvercoder9 4y ago
    Any reasonably-sized storage has already been contracted out in advance, and improvising additional storage capacity isn't really viable given the amounts of gas we're talking about and the environmental laws storage has to comply with. However, what has happened in the past for oil is tanker ships anchoring with a full load just offshore until they can sell the load for a good price. I don't know whether that's also feasible for LNG though, given the boiloff concerns.
    - matai_kolila 4y ago
      Yeah that's what I was thinking, but also using trucks that are for short-term transport as longer term storage could be possible to make a quick buck, but I bet anyone that can do that is doing that heh (or can't if it's not feasible technically).