The Russian energy weapon has lost its terror, as has the “Neue Zürcher Zeitung” (“NZZ”). According to the FT, prices are still rising and, while this is painful, the price of gas is at a level most western European economies can handle. The widespread bottlenecks, which were justifiably feared before, have not occurred, continues the “FT”.
According to European Commission President Ursula von der Leyen, gas prices in Europe have fallen faster than expected. European natural gas prices are down 80 percent this month from their August peak of 350 euros per megawatt-hour, von der Leyen said at the World Economic Forum in Davos this week. “This is lower than before the war in Ukraine.”
Portal/Sputnik Russian President Vladimir Putin
From Russia to USA
Von der Leyen cited the EU’s joint efforts as the reason for the development. Europe has overcome Russia’s reliance on fossil fuels and replaced about 80 percent of Russia’s piped gas. Furthermore, gas storage facilities were filled and demand reduced – by more than a fifth between August and November.
According to Quartz, the lack of Russian gas in Europe was partially compensated by the increase in imports from the USA. That shift could make the US Europe’s top energy supplier this year, she said.
Cold wave could send prices back up
Against the background of Russia’s war of aggression against Ukraine and the sharp drop in Russian gas supplies to Europe, gas prices rose sharply in 2022, peaking in August. When the war in Ukraine broke out in February last year, gas cost about 120 euros per megawatt-hour. More recently, the average price has been between 50 and 60 euros per megawatt/hour.
The reason for this is, among other things, the mild winter caused by the climate crisis. In the event of a cold spell, however, energy prices could rise again, speculates the Financial Times. But even if Russia were to further reduce its supplies, this would not cause panic, the storage facilities are sufficiently full, the “FT” also writes.
Portal/Fabian Bimmer The LNG freighter “Hoegh Gannet” in the port of Brunsbuttel
Kremlin budget hit
However, it would be foolish to rule out further price fluctuations, according to the FT. But the end of Russia’s energy war is just a matter of time, the FT continued. Last year, higher gas prices for Moscow more than made up for the loss in volumes sold. But that now seems unlikely. Western sanctions have effectively halved the price Moscow can get for its oil and hit the Kremlin’s budget, the Financial Times said.
By 2024/25, more liquefied natural gas (LNG) will enter the world market. This would further ease the supply situation and make extreme price spikes less likely. There is a small risk, if the demand for gas in the industry increases, this could also increase the price of gas again. However, the expansion of renewable energy must be accelerated to eliminate the strategic weakness exploited by Putin, continues the FT.
Portal/Michael Sohn LNG Terminal in Wilhelmshaven, Germany
There are already three LNG terminals in Germany
With the new LNG liquefied gas terminal in Brunsbüttel, Germany has already replaced around a quarter of Russia’s lost delivery volume. With the third LNG terminal in the north, capacities of 14 billion cubic meters of gas have already been built, German Economy Minister, Vice-Chancellor Robert Habeck (Greens) said on Friday in Brunsbüttel in Schleswig-Holstein . During the war in Ukraine, Germany lost 55 billion cubic meters of gas from Russia, which must be replenished.
After an exceptionally short planning and approval period, three LNG projects have already been launched in recent weeks – in Wilhelmshaven, Lubmin and now in Brunsbüttel. “There has to be more.” For now, gas is still needed for energy supply. The other LNG projects would also have to be implemented quickly. According to the German Ministry of Economic Affairs, the floating terminal in Brunsbüttel will accept liquid gas from LNG tankers and feed it into the German gas network. The annual regasification capacity is estimated at 7.5 billion cubic meters, which is expected to be fully utilized by the end of 2023.
IEA: December oil exports at 2022 low
The International Energy Agency (IEA) also assumes that Russian oil exports will drop after the European Union oil embargo. They are likely to have fallen to their 2022 lows in December, according to the IEA report.
Portal/Maxim Shemetov A Russian refinery in Konstantinovo, near Moscow
According to association estimates, Russia earned US$ 12.6 billion from the sale of crude oil and fuel in December, significantly less than in November. Over the past year, however, Russia has achieved a significant increase in overall revenues due to higher prices.
Russia is also sending less and less gas to Europe through Ukraine. According to the state news agency TASS, a daily volume of 25.1 million cubic meters will be pumped across the country, 28 percent less than in recent days. Despite the war, Russia continued to pump around 40 million cubic meters a day through Ukraine for months. Earlier this year, however, the value dropped.
Secured gas supply in Austria
Despite the energy crisis, gas supplies in Austria are guaranteed this winter. Memory is currently 87 percent full. This corresponds to 83 terawatt hours (TWh) of gas. The supply situation was ensured, for example, by the high level of storage at the beginning of winter and high temperatures for the time of year, according to a background discussion by Austria Gas Grid Management (AGGM) on the sidelines of the Austrian Gas Infrastructure Day Thursday in Vienna.
A high level of post-winter storage is still “critical” in terms of security of supply, he said. Replacing Russian gas is an “enormous challenge”, especially when storage levels are low. From today’s perspective, experts expect storage tanks to still be between 40 and 60 percent filled after the April winter. After last winter, it was only around 20 percent.
IEA: Imponderables on the radar
However, the IEA believes it is possible that energy markets will tighten in 2023. IEA chief Fatih Birol told the Portal Global Markets Forum in Davos that he expected prices would not continue to rise. This could ease pressure on energy-importing developing countries. “I wouldn’t be too relaxed about the markets,” continued Birol. “2023 could well be a year where markets are tighter than some colleagues believe.”
Currently, there are no bottlenecks in the market. But you have to have imponderables on your radar – above all Chinese demand and Russian supply. “If the Chinese economy recovers this year, which many financial institutions expect, demand could be very strong and put pressure on markets.” In Russia, there are many question marks over the country’s ability to export due to Western sanctions, but also the long-term challenges Russia is grappling with.