Europe | Pressure eases on natural gas

The energy price situation has turned out better than expected, after it became clear that there would be no gas shortage this winter, partly due to the moderate temperatures. Even so, the natural gas market will remain under strain at least through 2024.

Key points

• Key points:
• The panic that broke out last summer with respect to a possible gas shortage this winter drove a number of measures to increase the gas supply and reduce demand. Combined with the moderate temperatures, these measures have proved positive.
• Demand for natural gas in Europe has been 16% down on the average for 2018-2021, and storage is at 63% of total capacity, 26% up on the average for this period.
• On the supply side, gas flows from Russia to Europe will continue to be limited: although access through the Nord Stream gas pipeline is closed, a total of 3.6 bcm (billion cubic meters) are still entering Europe through the Ukraine and TurkStream pipelines, as well as LNG imports.
• This positive trend in demand and supply has pushed prices down to similar levels to the period before the start of the war, at just over 50 euros/MWH. The futures curves for winter 2023-24 are under some pressure, at around 60 euros, but very far from the levels reached in 2022.
• Our scenario with relatively conservative assumptions leads us to think that natural gas reserves will not be exhausted next winter, but could fall by around 25 bcm by the end of February 2024, below the security levels recommended by the International Energy Agency.

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