September kicks off with markets weighing on tensions with Russia over energy prices. “Europe is facing high natural gas prices and potential shortages as supplies from Russia dwindle,” warns Emma Stevenson, investment writer at Schroders (LON: SDR ).
Natural gas prices in Europe have multiplied by 12 since a year ago, after Russia reduced its supply by 40% of Europe’s needs. Nord Stream I is now undergoing a complete three-day ‘maintenance’ shutdown that almost guarantees double-digit inflation and a recession in the UK and Europe later this year,” said Ben Laidler, global markets strategist at Nord Stream I. investment in multi-assets eToro, which analyzes the evolution of gas prices in Europe and how they could behave throughout the winter.
As Laidler points out, the authorities are responding with significant support for spending, ceilings on gasoline prices, rationing and extraordinary taxes. “Local natural gas prices will remain well above long-term averages, but could still fall sharply from recent peaks. Gas storage levels are above average, demand is falling, and a decline is forecast.” mild winter. This would have wide-ranging impacts on the market, from carbon ETS to natural gas prices in the United States.”
Laidler analyzes these aspects:
Europe is at 80% gas storage levels, ahead of its self-imposed November 1 deadline. However, the largest users, Germany and Italy, already exceed 80%.
Long-term weather forecasts show a milder-than-average winter. This would continue the trend of lower winter heating demand and lower heating degrees (HDD).
Demand is falling, with German industrial use down 20% and the EU targeting an overall demand decline of 15% this winter.
A change in the EU’s marginal pricing model, or direct subsidies, would decouple gas prices from electricity prices.
“Natural gas prices are likely to remain high, with Europe’s needs stretching well beyond this winter, coupled with the current drought and technical problems at nuclear plants. But they may still fall as fast as they rise.” December 2021 and March 2021 saw price drops of 60%,” explains Laidler.
“EU plans to decouple natural gas from electricity prices could have a widespread impact. Lower prices would undermine EU ETS carbon credits and moderate overall US natural gas demand modestly,” the expert adds. from eToro.
“Although in the short term we are seeing the clear negative consequences of the increase in gas prices, in the medium and long term a clear winner of this crisis will probably be the renewable energy sector. The need to curb harmful emissions and reduce dependence of Russian fossil fuel imports go hand in hand Renewable energy projects, such as wind or solar farms, may not be immediate solutions to the problem, but they are much faster to start up than a nuclear power plant, for example. Rising energy prices are also reflected in long-term contract prices, meaning the returns on investment in these projects now look more attractive,” concludes Emma Stevenson of Schroders.