Difficult start of the year for European consumers/ Experts predict higher gas prices
Gas prices in Europe have risen by around 45% this year, adding to the burden on households and industry as they struggle to recover from the worst cost-of-living crisis in decades. There is likely more to come with Russian gas flows set to stop on January 1.
Futures for next year are already carrying a premium, a strong signal that prices will remain higher for longer, which ultimately translates into bigger bills for consumers. Some traders estimate the impact of the lack of flows up to 10 euros per megawatt higher than if the flows continue.
The timing of the completion of the Ukraine-Russia transit contract looks dangerous. The region's gas reserves, a buffer for tighter periods, are being depleted at a faster-than-normal pace due to periods of cold, windless weather, which could make it harder for traders to secure supplies for next winter. The weather is expected to get colder, potentially increasing demand for heating gas.
The 15 billion cubic meters of gas that Russia currently sends through Ukraine each year is less than 5% of Europe's total needs. However, although it has been clearly signalled, the loss of one of the last remaining routes for Russian pipeline gas would put more pressure on an already tight gas market and push global prices higher.
Almost three years since the war in Ukraine "upended" the energy market in the region, sending prices soaring, balances remain very tight. Europe has worked to diversify its sources of supply, buying more cargo at sea, increasing its dependence on Norway and creating renewables. However, prices have continued to be extremely sensitive to any perceived production risks, especially at a time when Asia has increased LNG purchases as extreme heat waves become more frequent and top importer China has added storage capacity. intensifying competition.
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