The Russian invasion of Ukraine drove up energy prices, but European gas has fallen back below pre-war prices in recent days as the continent finds alternative supplies and mild winters.

(Reuters file photo)


The price of natural gas rose to 5 times in August last year

[Financial Channel/Comprehensive Report] Russia sent troops to invade Ukraine in February 2022. Because Europe is highly dependent on Russian energy, the war pushed up the price of natural gas. In the winter of 2009, European natural gas has now dropped below pre-war prices.

The February natural gas futures price of the European benchmark index Dutch Natural Gas Trading Center (Dutch TTF) closed down more than 10% on January 4, reaching 65.022 euros per megawatt-hour (MWh). Before the war in Ukraine, the price was the lowest since October 2021.

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In February 2022, on the eve of Russia’s invasion of Ukraine, the Dutch TTF natural gas futures price fell at about 88 euros/MWh, and hit a record high of 343 euros/MWh in August of the same year, equivalent to more than five times the current price level. The surge in prices has also prompted a push by the European Union to set a cap.

Natural gas transported by Russia through pipelines used to account for 40% of Europe's total consumption. After the outbreak of the war, it now accounts for only about 9%.

(Photo by European News Agency)

9% of Europe's dependence on Russia for early storage of gas for winter 

Russia used to supply about 40% of Europe's natural gas consumption. After the outbreak of the war, European countries have been actively expanding domestic natural gas reserves in order to avoid energy supply problems and encourage people to save energy in winter. As of the 4th, the European natural gas storage capacity was close to 84%, from A slight increase from 83.1% a week ago.

Higher than the past 4-6 years, the average natural gas reserves in December was about 13%.

The 27 EU member states began stockpiling gas last year amid fears of winter supply shortages, with overall reserves climbing to 82% by September, above the 80% target originally scheduled to be reached in November.

In the case of soaring prices, natural gas consumption from August to November 2022 will also drop by about 20%.

In order to counter the European Union’s sanctions against the war, Russia has tightened the supply of natural gas to Europe. Since Putin’s troops entered Ukraine in February, Russia’s natural gas transported to Europe through pipelines has increased from 40% to 40%. 9% or so.

According to data released by Gazprom, in 2022, Russia's natural gas exports to regions outside the former Soviet Union will be 100.9 billion cubic meters, which is the lowest supply since the disintegration of the Soviet Union in 1991.

In terms of past records, the lowest figure was 117.4 billion cubic meters in 1995.

Imports of liquefied natural gas (LNG) by sea have also helped replace pipeline gas shipments suspended by Russia.

After the Ukraine war, Europe moved quickly to secure LNG imports from the US, Qatar and other exporters.

Europe has also been quick to build LNG terminals, removing many of the usual bureaucratic hurdles and opposition on environmental issues.

An unusually warm winter in Europe has reduced demand for natural gas and eased pressure on energy supplies.

(AFP)

Natural gas demand plummets in Europe amid warm winter

The unusually warm winter in Europe is another major factor. Entering the new year, many places in Europe have broken January temperature records, including the Netherlands, the Czech Republic, Poland, Denmark and other countries.

According to reports, on New Year's Day, the temperature in Berlin, Germany reached 16 degrees Celsius, setting a January record; the temperature in Warsaw, Poland was 5 degrees higher than the previous record high; the Czech Republic ushered in the warmest New Year's Eve in history.

A warmer climate has reduced demand for natural gas in Europe this winter, easing pressure on local energy systems and keeping prices in check.

Unusually warm weather is expected to persist in most regions, playing down concerns that continental Europe could face energy rationing and blackouts due to reduced supplies of Gazprom.

Growth in renewable energy is also helping to ease prices, with strong winds in some areas easing pressure on the market and, according to estimates by Bloomberg, Germany's wind power output is approaching record levels.

But experts warn that winter is not over yet and gas prices could still rise again if a cold snap ensues.

While Europe continues to build up its LNG import capacity, increased demand for natural gas from China and other Asian countries is likely to intensify competition in the LNG market.

Imports of liquefied natural gas (LNG) by sea have also helped Europe replace pipeline gas shipments suspended by Russia.

(Bloomberg file photo)

No worries, Europe begins embargo on Russian oil

Although the price of natural gas in Europe has fallen sharply from its high point, falling 52% since mid-December, the price is still high. The benchmark price of natural gas is still nearly five times that of two years ago, and about five times the cost of natural gas in the United States. Energy-intensive industries such as glass have struggled to compete with or even remain open to rivals in other regions.

Uncertainty remains in other energy markets, with the European Union imposing an embargo on Russian crude oil last (December) and extending the ban to Russian oil products in February, a move that is expected to push up the critically important transport sector. diesel fuel prices.

Falling wholesale natural gas prices are also not expected to provide immediate relief to consumers and businesses facing high energy bills.

As the utility buys gas in advance to ensure supply, it will still take several months to be reflected in customer bills if prices continue to fall.

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