What Impact Will the Nord Stream Leak Have on Gas Prices?
Europe is skating on thin ice at the moment, as they attempt to prevent power rationing and scheduled blackouts from becoming a relative certainty across the continent before winter. Some of the worst affected countries will have to be prepared to pay through the nose for liquefied natural gas (LNG) imports, hope for mild weather conditions, and reduce their overall energy usage in the wake of the Nord Stream sabotage.
Prices may have decreased from the highs experienced around the time of Russia’s invasion of Ukraine because of successful stockpiling. However, the wholesale Dutch gas price, which is the European benchmark, is still almost 80% higher than at this time last year. As an investor, keeping track of the energy markets and capitalizing on opportunities during times of volatility is best with a regulated and trusted broker, such as Easymarkets, for a convenient, safe, and simple trading experience.
Winter Looms
Thankfully, natural gas stockpiling has exceeded expectations so far at around 90% compared to the 80% capacity expected for November this year. This news caused prices to decrease to three-month lows, hovering around €150 per megawatt-hour at the Dutch Title Transfer Facility.
Difficulties with major pipelines being out of commission are casting doubt over whether there will be enough to cover shortfalls this year though, and certainly for next year. Some experts are predicting there may be as much as a 15% shortage across the continent, which will inevitably require cuts to usage for many.
With the added pressure of inflation, the further reduction in Russian supplies of gas will undoubtedly disrupt industrial activity across most sectors while sending energy bills even higher for the average person.
This is especially true of Germany, Europe’s largest economy, and one of the continent’s top importers of Russian gas, as it is most susceptible to supply interruption and has had to develop strategies to protect its businesses and citizens. Since the suspected sabotage of the Nord Stream networks, their hopes for resumed imports have all but evaporated.
Competition for energy grows
Even while Europe has been importing more liquefied natural gas (LNG) and developing the appropriate infrastructure, it still faces severe competition in the worldwide market, particularly from Asia, if they also have a cold winter season.
It seems less so from China more recently though, as the major energy importer has been slashing its requirements for LNG and diverting it to Europe instead. Reuters reports that the country is expected to import the lowest amount of gas since around 2006, around 65-67 million tonnes compared to the 78.9 million tonnes it imported in 2021.
Bloomberg reported back in June that China at the time had imported a substantial amount more than usual of Russia’s LNP due to its competitive pricing. Up to around 70% more than the previous period in 2021. It’s caused some in the industry to speculate whether China is purchasing Russian gas at a discount and quietly re-selling it back to Europe.
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