© Reuters Gas prices in Europe plummeted nearly 20%, analysts warn the real test is yet to come
Financial Associated Press, October 25 (editor Xia Junxiong)European natural gas futures plunged as much as 18% on Monday (24 October) local time, dropping below € 100 / MWh for the first time since June. natural have eased market concerns about the winter energy supply.
Gas futures in Europe are already down around 70% from their August highs, with local warm weather expected to continue into the next month, delaying the region’s warming season and meaning Europe will have more time to replenish gas reserves.
The energy crisis has pushed European inflation to the highest level in decades, bringing the European economy to the brink of recession. Despite the recent drop in prices, energy prices in Europe are still about three times higher than the five-year average for the same period, but supply problems could flare up again as winter approaches.
After the outbreak of the Russia-Ukraine conflict, with the sharp deterioration of Russia-EU relations, Russia reduced the flow of natural gas to Europe to about 20% of the amount before the outbreak of the conflict. Europe has also aimed to get rid of Russian gas, looking for alternatives in other parts of the world, and is also rushing to stockpile gas to survive this winter.
As Europe’s largest economy, Germany is also significantly more dependent on Russian gas than other EU member states, so the country is particularly active in seeking alternative energy supplies. With more liquefied natural gas (LNG) inbound, Germany will fare much better next winter than this year, according to German Economy Minister Robert Habeck. About one third of the natural gas capacity lost due to the closure of the Nord Stream 1 pipeline can be recovered with supplies from places such as Norway and the Netherlands.
Industry insiders pointed out that with natural gas reserves and natural gas imports to other regions, Europe is expected to have a normal winter, but curbing demand is still key to alleviating the gas shortage.
Graham Freedman, an analyst at consultancy Wood Mackenzie, said: “Europe is currently well positioned on the supply side, the risk of blackouts and rationing is receding, but the real test will come when the climate cools.”
