QNA
Brussels
Rising natural gas prices and increasing uncertainty are set to dominate Europe’s energy outlook for the coming winter, Euronews said.
Europe’s benchmark natural gas prices are on the rise, marking uncertainty about sufficient supplies and increased demand as Europe is approaching the third winter since Russian-Ukrainian war, it added.
According to Bloomberg, escalating tensions in Ukraine have contributed to about a 45 percent surge gas prices this year. While levels are still far below 2022 records, they are high enough to risk deepening a cost-of-living crisis for households and intensifying competitive pressure on strapped manufacturers. However, the necessary natural gas reserves appear to be supplied and secured at the moment, Euronews said.
Euronews quoted President of the London College of Energy Economics Dr. Yousef Alshammari as saying "Uncertainty oversupply continues to dominate the markets despite the availability of sufficient gas reserves.’ He added that the EU gas storage capacity stood at 90 percent in August, way before its deadline and "today, gas storage stands at 95 percent full, well above 100 bcm billion cubic metres”.
However, increased demand for heating and electricity due to lower temperatures has already tested capacities in the first weeks of November.
Recent low temperatures increased gas storage withdrawals in Europe in the first two weeks in November, tapping close to 4 percent (4.29 bcm) of Europe’s full gas storage capacity, Euronews said, citing data from Gas Infrastructure Europe.
Alshammari expects that storage levels will not be as high by Spring 2025 as they were at the end of the previous winter, in April 2024, when they stood at 60 percent of capacity.
"It looks like this winter they could go well below 50 percent which means that Europe will need to buy much more gas this next year to restore gas storage at nearly full levels,” he added.
Gas storage is a lifeline during the coldest periods but inventories this year are rapidly declining after frosty temperatures increased demand for heating and a wind drought required more usage for power generation, Bloomberg said.
"We still have problems with gas supply,” Bloomberg quoted Markus Krebber, chief executive officer of RWE AG, as saying said in recent statement. "If we really want to be independent of Russian gas we need to have more import capacity and we will probably see this again this winter because gas storage facilities are emptying quite quickly as we have a cold start to the winter.” As a result of the growing tensions, the US sanctioned Gazprombank, the last major financial institution exempt from penalties and a handler of payments for Russian gas, Bloomberg added.
Although Europe has reduced its reliance on Russia, losing one of the last remaining routes for pipeline gas would put more pressure on the gas market and send global prices soaring, according to analysts at Energy Aspects.
Bloomberg pointed out that at the height of the energy crisis in 2022, Germany ordered mandatory quick purchases of gas for storage from the global market at record prices. To try to claw back some of the extra cost, Berlin introduced a gas-storage levy, paid by traders or utilities for deliveries through Germany.
"This is beginning to resemble a 2022 scenario in which the EU purchased gas at any price,” Bloomberg quoted Arne Lohmann Rasmussen, chief analyst at Global Risk Management in Copenhagen, as saying. "Next year, this could potentially occur during a year of strong Asian demand.” It added that Fatih Birol, the executive director of the International Energy Agency, is sounding the alarm. He warned that Europe needs ample inventories for later this winter if Russian gas transit via Ukraine ceases on Jan. 1 with the expiration of a deal between Moscow and Kyiv.