Europe’s natural gas market still faces the risk of volatile prices this winter even though the worst in the continent’s energy crisis seems to be over, according to the International Energy Agency, Bloomberg reports
“Major uncertainties remain ahead of the upcoming heating season,” the Paris-based IEA said in a report Monday. “A cold winter, together with a full halt in Russia piped gas supplies to Europe early in the heating season, could easily renew market tensions.”
IEA’s warning comes ahead of the second full winter without normal flows from Russia, Europe’s former top gas supplier. Even though prices have fallen significantly from last year’s records, fuel contracts for the forthcoming cold season are trading at a premium to near-term prices, a sign of the persistent market fragility that could result in another crunch later this year.
If Europe freezes for a prolonged period and renewables don’t provide sufficient relief, gas may double from current winter price levels to €100 a megawatt-hour, Morgan Stanley said earlier this month. At the other extreme, a mild, windy winter means prices could slump to about €15, the bank said.
The IEA also has several scenarios, including those where temperatures above normal and ample imports of liquefied natural gas would see Europe managing even without Russian flows. However, that also depends on LNG demand in Asia, and any unplanned outages could disrupt the balance as global gas supply remains tight this year, it said.