European winter gas shortage likely to last 3-5 years, commodities experts say


Ed Morse, global head of commodities research at Citigroup, said winter gas shortages in Europe, now reeling from the energy crisis, could last at least three more years.

“European prices will return to early 2021 levels sometime between 2025 and 2027,” Morse said in an interview. bloomberg It points out that LNG export capacity will not “grow overnight”. Europe’s current energy crisis was caused by Russia cutting off natural gas supplies to the region in retaliation for sanctions imposed on Moscow for its invasion of Ukraine.

Reserves may be depleted sooner in the coming winters as Russia’s gas imports decline. This makes it even more difficult to stockpile gas for the next few winters.

According to Niek den Hollander, chief commercial officer of German energy giant Uniper SE, many European countries will not be able to fill up their gas storage facilities next summer as they have this year, and will not be able to do so next year. Problems can arise in winter.

European energy ministers will meet on Friday to discuss the region’s energy crisis, including measures to contain costs, cap natural gas prices and even suspend derivatives trading in the power sector.

Rating agency Fitch expects the European Union’s plan to increase supplies of alternative gas and reduce gas usage by 15% in 2023 will help avoid a severe shortage on the continent.

However, the EU winter gas supply and demand situation continues to be plagued by several uncertainties, including the war in Ukraine, LNG supplies and temperatures.

financial worries

The gas supply crisis and accompanying price hikes are putting financial pressure on the European economy. Dutch TTF October gas contracts rose to €272 per MWh on Monday after Russia announced that one of its gas supply pipelines serving Europe would remain closed indefinitely. did. This is about a 400% increase compared to a year ago.

European companies are now demanding at least €1.5 trillion in government liquidity to cover margin calls.

Energy companies typically require a company to make a margin payment before delivering electricity. With gas supplies constrained, minimum deposit prices have skyrocketed, leaving many businesses in financial trouble.

“It has a sort of Lehman Brothers energy industry element,” said Finnish Economy Minister Mika Linthila, referring to a 1.5 trillion plan to fund power companies.

In Italy, which relies on imports for three-quarters of its electricity consumption, the cost of importing energy will more than double by 2022, the country’s economy minister recently warned.

Naveen Aslapury

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Naveen Athrappully is a news reporter covering business and world events for The Epoch Times.