The International Energy Agency warned that Europe could still be in for a difficult winter, if Russia cut its gas supplies to Europe and if cold weather occurs.
The IEA stated that even if Europe’s gas storage facilities are close to 100% capacity by October – the expectation for which has helped lower price in recent months – that is “no assurance” against future market tensions.
“Our simulations indicate that a cold, snowy winter will occur in conjunction with the complete halting of Russian gas supplies to Europe. . . The IEA stated in its annual report on the gas market released Monday that price volatility could easily return.
The warning highlights the potential disruption caused by a renewed conflict over energy with Moscow. This is despite the sustained drop in prices that has occurred since December, which has led many to believe that Europe’s worst gas crisis may be behind it. Around 10% of EU gas imports are still supplied by Russia, and a further 5% is delivered as liquefied gas.
TTF, Europe’s benchmark gas rate, dropped to €24.63/mwh in Monday’s trading. This is the lowest price since early June and 90 percent lower than it was in late August of last year, at the height the energy crisis.
Gas Infrastructure Europe, a trade association, reports that gas storage capacity in the EU is currently above 80 percent, which is nearly 20 points higher than the five-year average. Analysts had expected storage sites that can hold up to 100 billion cubic meters to reach 90% of capacity months before the EU official goal of November.
The IEA stated that if a combination of a harsh winter, a complete shutdown of Russian pipeline natural gas and a low availability of liquefied gas were to occur, EU storage would only have 20 percent gas in April next year, a level which could threaten supply disruptions.
The IEA stated that even if Russia did not pipe gas to Europe, storage sites would still end the heating season at a level of inventory above 50%.
It added that “continued structural reductions in gas demand” such as better energy efficiency and rapid development of renewables, along with the installation of heat pumps, “will be necessary to ensure a safe gas balance for winter 2023/24.”
In its report, the multinational organisation said that due to the global gas crises triggered by Russia, it had revised down its medium-to-long term outlook for the demand for natural gas.
The sharp rise in natural gas prices has reduced its competitiveness compared to other energy sources, and its reputation as a “reliable” fuel has been questioned by the steep cuts in Russian gas supply,” it stated.
The global gas demand growth between 2020 and 2024 was reduced to 200 bcm compared with the previous 350bcm. More than half of this revision is attributed to Europe.
It said that “this reflects the more stringent standards for energy efficiency, the faster deployment of renewables, and the quicker electrification in heat as well as reduced use of natural gas by industry.”
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