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Driving Fundamentals of Natural Gas Price in Europe

Author

Listed:
  • Saleh Mothana Obadi

    (Institute of Economic Research, Slovak Academy of Sciences, Slovakia.)

  • Matej Korcek

    (Institute of Economic Research, Slovak Academy of Sciences, Slovakia.)

Abstract

This paper attempted to examine the factors driving the price development of the Title Transfer Facility (TTF) month-ahead contract using linear regression over the period 2016 2019 when the TTF market became the most liquid natural gas hub and primary reference source for gas prices in Europe. We examined the possible fundamentals and used OLS methodology to estimate the linear regression model, which explained the development of TTF MA. We concluded the price based on factors determining marginal demand and supply. The most significant factors seemed to be the variables representing the price of German power and the price of coal since the competition between coal and gas in power generation determines the marginal demand, which sets the price for gas. The change in total demand was another significant factor, although its impact was smaller. The significance of the LNG variable indicated the exposure of European natural gas price to the global supply and demand. The model also suggested the importance of storage capacity for the whole system.

Suggested Citation

  • Saleh Mothana Obadi & Matej Korcek, 2020. "Driving Fundamentals of Natural Gas Price in Europe," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 318-324.
    • Handle: RePEc:eco:journ2:2020-06-42
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    References listed on IDEAS

    as
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    Cited by:

    1. Saleh Mothana Obadi & Matej Korcek, 2023. "Examining the Drivers of Natural Gas Price in Europe - Focus on the Role of Speculators," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 356-366, May.

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    More about this item

    Keywords

    Natural gas price; linear regression; commodity prices; Title Transfer Facility;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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