The International Energy Agency stresses that the surge in gas prices in Europe is due to a combination of a strong recovery in demand and lower than expected supply, as well as weather factors. We’ve had a long, cold season of heating in Europe behind us, depleting warehouses. In addition, there is an economic recovery after the pandemic and the availability of wind power is lower than usual in recent weeks.
The global gas market was also shaped by similar factors. In the first quarter of 2021, severe colds hit East Asia and North America. It was followed by heat waves in Asia and droughts in various regions, including Brazil. All these events contributed to the increase in the demand for gas. In Asia, it remained high throughout the year, driven mainly by China, but also by Japan and Korea. Affected the prices.
Supply-side constraints emerged – global production of liquefied natural gas (LNG) is lower than expected due to a series of shutdowns, delays and unscheduled maintenance.
In turn, Russia, despite fulfilling its long-term contracts, has reduced its exports to Europe compared to the level of 2019. The agency said: “The IEA believes that Russia can do more to increase gas availability in Europe and ensure that its storage facilities are adequately filled. Getting ready for the next winter heating season. – It is also an opportunity for Russia to confirm its credibility as a reliable supplier to the European market – he adds.
A group of more than 40 MEPs who recently wrote a letter to the European Parliament shares a similar view. In it, they demand urgent action on Gazprom’s manipulation of the gas market. They noted the deliberate actions of “Gazprom” to limit supplies to Europe and raise prices. This is related to Russia’s pressure on the EU to agree to the rapid launch of Nord Steram 2, despite its incompatibility with EU regulations.
The International Energy Agency reports that gas storage levels in Europe are well below their five-year average, but not much lower than the previous five-year minimum achieved in 2017. It indicates that the European gas market may face other challenges of this kind in In the future. Unplanned downtime and severe frosts, especially in late winter.
Higher gas prices are translating into new market areas. In recent weeks, European electricity prices have reached their peaks in more than a decade, exceeding €100 per megawatt-hour in many markets. For example, in Germany and Spain, prices in September were about three or four times higher than the 2019 and 2020 averages. This increase is attributed to higher gas and coal prices. Expensive gas has prompted electricity suppliers in many markets to switch from gas to coal in the process of power generation.
The links between the electricity and gas markets will continue in the coming years, as gas remains an important tool for balancing energy markets in many regions. However, as the transition progresses, global demand for blue fuels will begin to decline.
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