Coupled with a continued flow of Russian gas via the Ukrainian territory, the mild winter of 2022 will enable European countries to avoid a shortage of natural gas this year and next, suggests Jeremy Weir, the CEO of major commodity trader Trafigura, as quoted by Bloomberg.
Weir predicts that by the end of this winter, European storage facilities will still be one-third full, and as Trafigura estimates, this volume will get Europe through next winter. The only condition is to ensure gas transmission via Ukraine to the EU, which has so far continued despite the hostilities.
“Should that [the continued gas flow from Russia and storage facilities filled to one-third of their capacity] be the case, we may not have so much of a problem the following winter, which was actually the real concern,” Weir said at the Financial Times Commodities Asia Summit in Singapore on Wednesday. “Jury’s out, but I think a significant problem has been alleviated.”
As Bloomberg reminds us, the warm weather has resulted in both a plunge in gas prices and a local excess of fuel. With the warm spell in mind, Europe has purchased a robust stock of liquefied natural gas that can be stored long-term and used when needed. Weir also pointed out that, despite everyone worrying about gas prices, Europe has avoided repeating the summer's spikes by taking timely measures. Meanwhile, Russia has recently warned that it might suspend European shipments, in particular, because of Moldova. As Gazprom claims, some of the gas shipped to Chisinau never makes it past Ukraine.
The debate about the EU’s gas stocks for this year and next is ongoing against the backdrop of Europe's attempt to negotiate a cap level for gas prices in the event of another excessive spike. As we learned yesterday, the European Commission proposed its own price cap version set at approximately $3,000 per 1,000 cubic meters of gas, to be also applied to spot and over-the-counter markets to prevent liquidity spillover. The emergency brake is supposed to come into effect only when gas prices soar to record-high levels, without any changes otherwise. Almost none of the countries were happy with the proposed option because it failed to meet the demands of either party, be it the advocates or the opponents of the threshold.
Its advocates dismissed the suggested cap level as too high to make a difference because it was on par with the peak levels registered in the summer of 2022. Meanwhile, its opponents argue that the proposed mechanism would fail to rein in gas and energy prices in a crisis, whereas dropping profits of energy companies will result in suppliers turning to more lucrative Asian markets. Initially, the final gas cap decision was scheduled for November 24 but, given the controversy, will be postponed to December.