Gas: will higher prices soon be a warning?
Raw materials
Posted by MoneyController on 27.11.2024
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The price of gas has been a topic of much discussion in 2022: now that the coming winter is expected to be in line with the cold temperatures of historical averages, it is possible that the price of the raw material will start to rise again in the coming months.
Since Vladimir Putin's Russia invaded Ukraine in February 2022, Europe's sources of energy supply have changed. As stated in an article in the ‘Financial Times’ (FT), written by S. Tani and A. Smith, one of the most conspicuous consequences is that the share of liquefied natural gas (LNG) has grown significantly: from 20% in 2021 to 34% today. Today, the price of gas is still quite low, but what awaits us is a winter that meteorologists predict will be less warm than the particularly mild winters of the past two years.
The point is that, as we read in the FT, in the winter period the demand for gas does not only increase in Europe, but also in Asia. Today, gas reserves are full, but a cold winter could lead to an increase in demand for gas from both continents, which would trigger a kind of upward price game to win supplies. Not enough - the FT also points out - on 31 December the contract for what remains of Russia's gas supply to Europe via Ukraine, i.e. 5% of the Old Continent's imports, expires.
But there are further uncertainties about the future of gas prices. On the one hand, S. Tani and A. Smith write, there is the possibility that Europe might have to cede part of its resources to Ukraine if Russia were to seriously damage its energy infrastructure. On the other hand, there is the possibility that the situation in the Middle East would lead to the closure of the Strait of Hormuz, which would mean a 20% reduction in the global supply of LNG (the increase in production of which is still small). Therefore, in the worst-case scenario hitherto conceivable, one could end up with only up to 35 per cent full stocks, which would make replenishment for the coming year much more expensive.
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