Concern again about gas prices

It has been more than a year of calm after the unusual ups and downs in its European prices natural gas and now concern is returning to the market. Although demand remains tight and Europe emerged from the warming period with unusually large energy reserves, participants at Amsterdam’s Flame conference see risks rising. And the prices justify them. There is concern about remaining Russian gas flows through Ukrainian and for the recovery in gas demand from Asia. And after two mild winters, the next one is likely to be more severe than usual.

“It’s too early to say we’re out of the crisis,” says Cara MacDonald, head of the sector LNG and clean fuels to RWE, and warns that “in case of a heavy winter, the demand situation will change”. And the concern is visible in the market, as futures for next winter are the most expensive.

After the Russian invasion of Ukraine, Europe replaced Russian natural gas with liquefied gas from other regions, the US, the Middle East and Africa. However, some countries, such as Austria and the Slovakia, still source most of their fuel from Russia. This may change soon. Speaking at the Flame conference, Andriy Prokofiev of Ukraine’s Gas TSO ruled out any interconnection deal that would allow Russian gas to be transported after the existing deal expires at the end of the year.

Gas contract negotiators are not ruling out some flow of Russian gas. However, these statements raise questions, as Marko Saalfrank, Axpo Holding’s head of continental Europe points out. But the questions are likely to return volatility to the market after prices retreated from the record highs they soared to at the height of the energy crisis in the second half of 2022.

As Patrick Dugas, head of the LNG sector at TotalEnergies, pointed out, there is also persistent competition between Europe and Asia for LNG. In the first quarter, its imports China of LNG increased by 21% compared to the corresponding period last year, while demand is also increasing from markets such as Thailand and the Egypt. Like Europe, Asia buys LNG during the Northern Hemisphere warming season. Other concerns were raised at the conference, such as the possibility of problems in the US during hurricane season and damage to power plants.