Natural gas traders have started to worry about next winter after a long period of lull on the price front, which basically lasts more than a year.
The 2022 rally, which peaked in August of that year, with prices in Europe (TTF) soaring to €250 per megawatt hour, looks like a distant past as today contracts for delivery in May range around 28 euros.
However, industry players attending a conference in Amsterdam this week they see risks rising and prices for contracts for next winter rising to €35 per megawatt hour.
The factors of concern
Although demand remains tight and this year’s heating season in Europe closed with the highest inventories on record, concerns are being expressed.
Among other things, they mentionn uncertainty regarding Russian gas flows through Ukraine; which are the only ones that continued after the closure of the Nord Stream pipeline in the summer of 2022. Also, they fear that next winter will be colderwhich will prompt an increase in consumption, after two consecutive mild winters.
“Are we out of the crisis? I think it’s too early to say,” said Cara MacDonald, RWE’s Head of LNG & Clean Fuel Procurement. “If we have a cold winter next year, demand-side flexibility will decrease,” he added.
After Russia’s invasion of Ukraine, Europe largely replaced Russian gas flows with LNG from other sources, mainly the US, but also the Middle East and Africa. Some countries, however, such as Austria and Slovakia, still source most of their fuel via this traditional route from Russia.
Russian flows through Ukraine are ending
This may soon change. Speaking at the conference, executive of Gas TSO of Ukraine ruled out any deal which would allow Russian gas to pass through when the current agreement expires at the end of the year. While traders don’t seem to be completely ruling out the possibility of some Russian flows, the Ukrainian statements raise a big question mark, an Axpo Holding executive said. This carries the risk of volatility rising again after 2022 and the price rally then.
Competition between Europe and Asia for LNG is also a factor, TotalEnergies’ head of LNG trading said. China’s first-quarter LNG imports up 21% compared to last year, while there are also signs of increasing demand from the Thai and Egyptian markets.
Follow Imerisi on Google News!
