Golden times for speculators: are gas prices being manipulated?

Golden times for speculators: are gas prices being manipulated?
Golden times for speculators: are gas prices being manipulated?

‘Irrational’ and ‘absurdistan’: experts are also looking at the screeching gas prices with wide eyes. What is going on?

First the figures: a year ago the gas price was 30 euros per megawatt hour, at the beginning of this summer it was 150 euros, at the end of August 350 euros and at the beginning of this week 280 euros. The price of gas has therefore fallen by 20 percent in recent weeks, but is still 9 times more than in September last year on the market. TTF gas futuresmarket, which is usually used as a reference for gas prices in Europe. ‘Irrational’, is what professor of international energy politics Thijs Van de Graaf (UGent) calls it. Gas trader Matthias Detremmerie, who, with his company Elindus, tries to buy the required amount of gas and electricity as cheaply as possible for his customers, large consumers, talks about ‘absurdistan’.

What’s actually going on? ‘The gas market is one of supply and demand. The slightest disturbance can lead to huge price fluctuations’, says Detremmerie. ‘Gas is important to everyone and if there is a threat of scarcity, parties are prepared to pay extremely high prices.’ Van de Graaf: ‘The gas price is being pushed up by a tsunami of bad news, from the low water level of the Rhine, about the French nuclear power stations that are not functioning properly and, of course, the great uncertainty about Russian gas supplies to Europe. Some now want to buy gas at all costs because they fear there will be a shortage this winter. They would rather buy now at a very high price than be confronted with shortages later.’

Whenever the gas price falls, Gazprom cuts gas supplies and the price skyrockets.

Thijs Van de Graaf, professor of international energy politics

Gas is traded on stock exchanges. These may be short-term contracts for immediate delivery (mockery in the jargon) or long-term contracts for delivery over several months (futures). Such a long-term contract can be resold several times without the gas being physically delivered. This is not only the case for gas, but also applies to all trading floors. A simple comparison: you can buy an apple at the market and eat it right away, or you can buy a crate of apples and sell it to someone else. Or you already order apples at a certain price that will not be harvested until next week. Or next year. And so on.

Anonymous buyers

There are many traders on the gas market, traders, active. These can be companies that bring or distribute gas to Europe, such as Shell, Engie and Eni. Van de Graaf: ‘Shell also has a department that does nothing more than buy and sell raw materials. The companies therefore do not limit themselves to the raw materials they produce or consume themselves.’ Detremmerie: ‘There are also large, international, independent trading houses that trade in commodities, and therefore also in gas, whose names mean nothing to the general public, such as Vitol, Gunvor and Trafigura.’

In addition, there are other players active in the market who are not interested in gas or other commodities, but are interested in buying and selling futures contracts with the sole intention of making a profit. This mainly concerns financial players, leveraged funds, who have a lot of money to invest. Detremmerie: ‘The market is anonymised, so nobody knows who the trading parties are, but a large bank like Goldman Sachs has an important department that trades in commodities, so you can assume that they also trade in gas.’

Van de Graaf: ‘Speculation has a negative connotation, but in the end that’s how it works on a stock exchange: products and contracts are bought and sold. If a speculator thinks that the gas price in December will be much higher than today, he will conclude a contract today at a certain price. He is not interested in that gas, but will sell that contract in October or November for more money. But if the price doesn’t go up, he’ll sit with that contract and rip his pants.’

And that happens. Van de Graaf points out that the oil price was negative in April 2020: anyone who bought oil received money. Corona was just on the rise at the time, the demand for oil plummeted and there were quite a few speculators who had oil contracts at a high price and wanted to get rid of them as quickly as possible. They were even willing to pay if someone took over the oil because the contract delivery date was approaching and they couldn’t physically receive and store the oil.


Trading gas on the stock exchange is thus a game of big boys and since the buyers remain anonymous, it often remains mysterious. Could it, for example, be that Russia is pushing the gas price up through purchases on the stock exchange? Detremmerie: ‘It is a consideration that I have already made myself. It certainly could be, but we don’t know whether Russia does that too. Perhaps, because Russia is using all possible means to drive up the gas price.’

“When Russia says it needs to maintain the Nord Stream pipeline, which supplies gas to Europe, it wants to push the gas price up. That is war language’, says Detremmerie. Van de Graaf: ‘Whenever the gas price drops, Gazprom reduces gas supplies because the pipeline has to be worked on, and then the price skyrockets again. It falls on.’

Liquid gas

According to some, despite the lower exports, Russia continues to earn good money thanks to the high gas price. Van de Graaf: ‘That was certainly the case in the first months of the war in Ukraine, but now their exports to Europe have shrunk to such an extent that I strongly doubt whether they still have the same income despite the sharp rise in gas prices. But we must not lose sight of the fact that, although Russia is slowly turning off the gas tap, the tankers carrying Russian liquefied gas, LNG, will continue to dock in Europe, including in Zeebrugge.’

The gas price will gradually decrease in the coming years.

Gas trader Matthias Detremmerie

Meanwhile, Russia would supply more LNG to China and China would resell it to Europe. In other words: not only Russia, but also China would then do good business because Europe is so hungry for gas. In any case, LNG tankers sometimes change course en route because another party has offered more money for a cargo. Indeed, trading a commodity is an intriguing business.

In any case, the high gas price ensures that the countries that pump gas are among the winners, such as Norway, Qatar, Algeria and the United States (US). Yes, American companies that can export gas also benefit from the fact that the gas price in Europe is about nine times higher than in the US (because the US can supply its own gas and even have a surplus). Van de Graaf: ‘You may find that outrageous, but we must not forget that thanks to the American LNG we survived last winter unscathed, albeit at high prices.’

Good news

And what about the attempt by Prime Minister Alexander De Croo (Open VLD) to persuade Norway to sell its gas cheaper? ‘Good try,’ says Detremmerie, ‘but I had nothing but a no expected. Why would they?’ Van de Graaf: ‘You can hope that Norway will do something, because it is also a democracy, and is a member of the European Economic Area and NATO.’

How will the gas price evolve? Detremmerie: ‘Europe has filled its gas reserves to 80 percent. I don’t think the price will climb above 200 to 250 euros this winter. At the beginning of next year it will be difficult again, because then we will have to replenish our reserves. But who knows what will happen in the meantime.’ Van de Graaf: ‘The winter of 2023 may also be difficult, but from the winter of 2024 we should be in a better position. Although that depends on what we do in the meantime: do we succeed in saving energy? Can we switch from gas to alternative sources such as sun, wind and hydrogen? Can we make agreements with other gas suppliers such as Azerbaijan and Norway?’

So we don’t have five or ten harsh winters ahead of us, as De Croo stated? Detremmerie: ‘I am happy with the Prime Minister’s decision, because the population had to be shaken up. We have to change our behavior. But I think we’ll get rid of it in five years. The gas price will gradually fall in the coming years.’ Van de Graaf: ‘If we succeed in the energy transition, Europe will do better in terms of climate objectives, our geopolitical independence will increase and our economy will benefit, because energy savings will make it work more cheaply. That is the good news in all this: there is a good chance that we will emerge stronger from the crisis.’

The article is in Dutch

Tags: Golden times speculators gas prices manipulated

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