For the first time in 17 months, European gas falls below the 50 euro threshold: this is what emerges from the trend of the contract traded in Amsterdam, the value of which fell by about 4% at the beginning of the session, up to 49.5 euros: This is the lowest since mid-December 2021, before Russia’s invasion of Ukraine on February 24, 2022.
The downward trend continues: since the beginning of the year, gas prices have already lost about 35%. Everything OK? Not exactly.
Indeed, an article by Bloomberg warned European consumers against toasting the news too soon: futures contracts on European gas in fact indicate that the energy crisis is not going to end soon.
Pay particular attention to the gas futures maturing in December, traveling at around 63 euros per megawatt hour, a higher level than the 55 euros of contracts expiring in March.
Both in contracts are up on the year, although the value is about 85% lower than that record tested last August, a 349 euro al megawattora.
Gas: danger of structurally higher prices
So far, Europe has managed to dodge the much-feared surge in prices, feared for the arrival of winter: the assists have been both the mild weather conditions and the constant imports of LNGor liquefied natural gas.
The stocks of natural gas accumulated by European countries they are also high: according to the latest analysis carried out by Bloomberg on Gas Infrastructure Europe data, published last Monday, gas stocks travel at a level, on average, around 65% of capacity, among the highest levels in recent years.
At the same time, the focus is shifting now about how to stockpile the future without Russia so much so that, in the coming weeks, the European Commission will consult with the member states to decide whether or not to prolong the emergency measures launched to reduce the demand for gas: measures that will expire at the end of March.
Traders bet on role of liquefied natural gaswhich should compensate for Russia’s failed ga offer.
However Henning Gloystein, director of the energy, climate and resources division of the Eurasia Grouphe wrote in a note that “Prices are likely to remain structurally higher than pre-Russian invasion (Ukraine) levels.”
Right, “the new regasification capacity in Europe – especially in the main industrial gas hubs of Germany, Italy and the Netherlands – it will help avoid severe gas supply shortages“.
Said this, “the higher LNG costs and the risks of a sudden surge in prices could put pressure on supply”.
Incidentally, most of the liquefied natural gas deals agreed by Europe have deliveries starting around 2025. This means that there will be at least two difficult winters for Europe, which will not necessarily be characterized by favorable ones meteorological conditions that have occurred in recent months.
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The ECB itself, in its economic bulletin, warned that the current level of natural gas inventories could go to zero faster than expected, in the event of a sudden change in temperatures and the arrival of cold weather, leaving the European Union gas market “in a more vulnerable position”.
The European Central Bankin the bulletin released yesterday, spoke among other things of the higher cost for the supply of natural gas that Europe risks incurring.
Indeed, the point is that “EU buyers compete with Asian buyers and therefore they have to pay a premium over Asian prices to attract the necessary quantities of liquefied natural gas”.
And there is too the obstacle represented by the reopening of China, which will see the second largest economy in the world increase the demand for energy, to restart those production activities that had been held back by the repeated lockdowns launched as part of the Zero Covid.
“A resurgence of Chinese LNG imports could limit the EU’s ability to secure gas supplies throughout 2023 – points out to the ECB, which specifies that “l’increase in EU gas imports in 2022 it was partly driven by the payment of higher prices, but also by a significant drop in Chinese demand for LNG.
“In 2022 – Indeed – Chinese demand was 22 billion cubic meters (bcm) less than in 2021. With consumption declining in other countries and global LNG export capacity expanding, especially in the United States, the EU was able to import significantly higher quantities of LNG compared to the previous year. Declining Chinese LNG imports in 2022 halted a decade of increases in Chinese gas demand.
Now, however, the ECB has warned“following the unwinding of China’s zero-COVID strategy in late 2022, increased economic activity is likely to spur a recovery in demand for LNG (liquefied natural gas), adding severe pressure to that world marketin which it is unlikely that large expansion phases of the capacity will take place export until 2025. This could limit the EU’s ability to attract LNG imports, especially since China has the right to decide whether to buy an already agreed volume, which corresponds to a considerable share of the
quantities of LNG worldwide”.