Analysts predict problems with gas in the EU in winter. What is the reason?
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Economics
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Analysts predict problems with gas in the EU in winter. What is the reason?

European gas

According to the forecasts of analysts and traders, EU countries may experience disruptions in gas supplies in the winter due to high competition with Asian countries for LNG supplies.

Points of attention

  • High competition with Asian countries for LNG supplies may lead to disruptions in gas supplies to EU countries in winter.
  • The uncertainty surrounding future weather patterns and the expiration of the gas transit contract between Russia and Ukraine pose risks for gas supplies to Europe.
  • Tensions in the Middle East and the potential closure of the Strait of Hormuz could threaten the stability of LNG supplies to the EU.
  • European countries are raising LNG prices to compete for supplies, which might result in market instability and increased gas prices.
  • If gas withdrawals this winter exceed those of the past years, EU buyers may need to enhance their competitiveness in LNG markets to replenish supplies, potentially causing a rise in wholesale gas prices.

What is known about the probable threat of disruptions in gas supplies to the EU

According to the publication, the European gas market has now become dependent on unstable global energy markets after refusing to buy Russian gas.

Europe's gas storage is currently full and the winter gas balance looks normal. But anything can happen. A few supply interruptions are enough, and everything can go awry, — admits one of the traders.

In particular, liquefied gas is in high demand among many countries in the world and has a limited supply.

In the EU, there may be problems with gas in winter
EU gas infrastructure

Deliveries are mostly made to the highest bidder. Under these conditions, EU countries compete with Asian countries and raise prices to obtain LNG.

Before the onset of winter, competition between EU countries and Asian countries is increasing.

How EU countries managed to get through the past 2 winters with record gas reserves

However, the past 2 winters have been relatively warm, allowing European countries to go through the winter with record gas reserves in storage.

Currently, market participants fear that the coming winter will not be so warm. The situation is also complicated by the expiration of the gas transit contract between Russia and Ukraine on December 31.

In addition, the mass media assume that Europe will be forced to supply gas to Ukraine as part of assistance during the heating season.

If a very cold winter suddenly arrives at the same time as the loss of Russian gas flows, this will be a very favorable factor for gas prices. And I don't think there will be any major alternative pipeline supplies. I think most of that gas will have to be replaced by LNG, says Rabobank energy strategist Florence Schmidt.

Concerns about stable LNG supplies to European countries also arise from tensions in the Middle East that could escalate to the closure of the Strait of Hormuz, putting 1/5 of the world's LNG supplies at risk.

If gas withdrawals this winter significantly exceed those of the past two years, EU buyers may have to increase their competitiveness in LNG markets to replenish supplies in 2025, potentially pushing up wholesale gas prices, the energy watchdog warned. EU Acer.

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