Since the Russian invasion of Ukraine in late February, Europe has rapidly reduced its dependence on Russian natural gas. Russia has also cut its gas supplies in response to Western sanctions. As a result, gas prices have been sky high for months, which in turn is driving up electricity prices as well.
ING Belgium does not expect any improvement in 2023. Europe absorbed gas imports from Russia, which decreased by about 80%, mainly with additional imports of liquefied natural gas (LNG). “The problem is that the LNG market is very small. If you look at the additional capacity: in 2023 there will be virtually nothing,” Vanden Houte points out. “It takes about three years to build new infrastructure to liquefy gas. That is why we still have a short-term problem.”
In addition, less LNG was shipped to China this year due to the country’s economic slowdown. “This has helped Europe in a way,” says ING’s chief economist. “But if you assume that China will experience stronger growth in the second half of next year, they will obviously import more LNG again. And this will continue to put upward pressure on natural gas prices.”
All of this means that ING expects the average gas price in 2023 to be “not lower and not even slightly higher” than this year’s (about 135 euros per megawatt hour).
In subsequent years, prices would drop due to the additional LNG capacity. “But even in 2025, the future currently still at a price of around 75 euros per megawatt hour,” Vanden Houte points out.
