HSBC has lowered its forecasts for future wholesale gasoline prices to reflect the mild weather in Europe. This raises hopes for a sharp fall in household energy costs.
The bank lowered its 2023 forecasts of the European gas price by around 30%, and its 2024 forecast by 20%.
HSBC reported that prices have fallen by half since mid-December, compared to levels seen before the invasion of Ukraine. This was due to a combination of high gas prices and lower gas demand.
Concerns that gas supplies could be cut this winter were raised by the Kremlin, which has reduced gas pipes to Europe. National Grid warned that a sudden drop in Russian gas supply to Europe and a cold snap could cause power outages.
The combination of high storage levels and mild weather has helped to improve the situation.
UK gas prices are now at just 170p per ton, down from August’s record highs of over 600p. However, they remain three times higher than the average price before the energy crisis in 2021.
Lower prices will likely translate into lower bills when the contracts suppliers have with energy buyers in advance expire. From July, annual bills will fall to PS2,500.
Kim Fustier is the head of European oil-and-gas research at HSBC. He stated: “Following a brief-lived cold snap a relatively mild winter had substantially reduced gas demand heating… Europe has out of the woods this winter, even if it returns to cold weather.”
Fustier stated that Europe’s gas consumption fell 12% in December compared to the previous year, and January was down 25%. The European gas storage is currently 83% full, which is a significant improvement on the historical average of less that 70%. It is expected to be just above 50% by March, far more than the 30% originally anticipated.
He said that increased competition from China for liquified gas (LNG), could be the “key driver” of gas prices in 2023, as China reopens its pipelines following the Covid restrictions. It is possible that other countries will struggle to replace significant Russian gas supplies, which were still available in the first half 2022 after Moscow shut down pipelines.
Fustier stated that it was increasingly likely that Europe’s worst gas crisis and its peak price are over. This is good news for both energy users and governments. However, gas is not cheaper, but it is less expensive.
HSBC anticipates that conditions will only “normalize” in 2026, when new LNG facilities are opened in Europe.