A year ago, gas prices in Europe were higher than now. However, then quotes fell sharply and EU countries went through the heating season quite easily due to the warm winter. This year everything is different. Europe faces a new energy crisis. Meteorologists, experts and gas companies do not share the optimism of European officials. A colder winter and a disruption to Russian gas supplies could refresh the EU’s memories of the energy crisis of 2022. Record volumes of fuel for this month were withdrawn from European warehouses in November.
The weather in Europe this winter will be colder than during the previous two heating seasons. Bloomberg reports this based on data from the European Center for Medium-Range Weather Forecasts. The weather will remain above seasonal norms, but Maxar Technologies predicts that heating demand will reach its highest level since the start of the winter season in Ukraine.
In November, Europe already faced calmer, colder weather, forcing a record 8.5 billion cubic meters to be removed from storage for that month. Compared to the previous two years, the difference is more than 4 times and similar consumption in the penultimate month of the year was recorded in the GIE only once: in 2018.
EU gas reserves remain high, at 95.5 billion cubic metres, but current consumption and weather forecasts make the market fear that Europe will end the winter with low supplies, which will have to be compensated by greater purchases at higher prices. .
A year ago, gas prices in Europe were even higher than the current $510 per thousand cubic meters. But then they fell sharply, something that is still not explained this year. And the climate is not the only reason.
Russian gas pipeline supplies to Europe have fallen almost five times in recent years, but their share in total EU imports remains 9-10%. And the risk of stopping Gazprom exports is now greater than ever. On the one hand, the Ukrainian transit could end on January 1, 2025, since the contract is about to end and its extension has not yet been decided. On the other hand, all Gazprom supplies to Europe are threatened due to US sanctions against Gazprombank, which is a key link in payments to European consumers for Russian gas.
“We continue to have problems with the gas supply. “If we really want to be independent of Russian fuel, we need to have more import capacity, and we are likely to see problems this winter because the gas storage facilities are emptying quite quickly – we have a cold start to the winter.” – stated the CEO of the German company RWE at an energy conference Mark Krebberreports Bloomberg.
Chief Analyst in Global Risk Management Arne Lohmann Rasmussen He stated that the situation is beginning to resemble the 2022 scenario, when the EU would buy gas at any price: “Next year this could happen due to high demand in Asia.”
So far, LNG consumption in Asia has started to decline, as some countries reduce their purchases due to high prices and some cargo goes to Europe due to lower prices in Asia.
“Gas is already more expensive than oil, which of course creates problems for its consumers and importers, especially in poor and developing countries. Additionally, some importers may prefer to resell the gas at a premium and meet domestic needs with coal or fuel oil. But if it’s cold, gas demand will continue to grow there.” – notes the deputy director of the National Energy Security Fund (NEF) Alexey Grivach.
Current prices of $510 per thousand cubic meters are 2.8 times higher than pre-crisis gas prices in Germany. And even keeping them at this level will be another blow to the German industry.
“Once again, energy-intensive economies led by Germany will suffer the most and suffer additional damage.” – Ole Hansen, head of commodity strategy at Saxo Bank AS, told Bloomberg.
Germany has been in the doldrums since the energy crisis, and a rise in inflation could increase voter disappointment ahead of snap elections in February, the agency said.
“There is an increasing risk that Europe’s luck with a mild climate will end next winter. In other words, we are forced to depend on LNG imports and, with it, the need to remain competitive with Asia.” – added Ole Hansen.
