After the start of the war in Ukraine, Europe got serious about stockpiling natural gas as part of policies to reduce dependence on energy imported from Russia. This year, storage facilities are likely to be full earlier than planned. And this gives authorities and industries confidence that last year’s energy crisis will not be repeated.
However, price volatility will continue because both demand before and during the upcoming winter will depend on two factors beyond our control – the weather and the contribution of renewable energy sources to the energy mix.
A warmer winter season, reduced EU consumption and reduced industrial demand amid high energy costs meant that Europe managed to survive 2022/2023 without gas shortages or gas restrictions.
In the event of another mild winter, gas prices in Europe could fall by half from current levels to as low as 15 euros per megawatt hour (MWh), according to Morgan Stanley.
“If the weather is warm and renewable energy sources enter more seriously into the energy mix, benchmark gas prices could collapse to the levels of late 2020,” analysts at Morgan Stanley, quoted by Bloomberg, said.
Futures for the previous month were at €27 per MWh on Thursday, while futures prices for December to February are around €50 per MWh.
A new gas pipeline in the Barents Sea could reduce Europe’s dependence on LNG
The only route for natural gas from the Barents Sea to markets is through Equinor’s LNG export facility in Hammerfest
A price of €15 is just one of the bank’s scenarios for natural gas prices in Europe after October, when the winter heating season is expected to begin.
However, there is a worse option, where prices could jump to €100 per megawatt hour if the 2023/2024 winter is colder than normal and renewables cannot generate too much electricity.
As of early July, gas storage facilities in the EU were 80.3% full, according to data from Gas Infrastructure Europe.
Full storage will be good news for European consumers this winter, but there will be uncertainty about the winter weather and how renewables will chip in to provide more electricity.
2023-07-17 15:10:59
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