- Russia’s Gazprom said European natural-gas prices could gain another 60% this winter.
- The state-energy giant has slowed exports and natural-gas flows to Europe amid the Ukraine war.
- European gas prices have been breaking record highs recently on the supply crunch.
Russia’s Gazprom said European natural-gas prices could surge by 60% this winter as the state-energy giant slows exports to Europe.
“European spot gas prices have broken through $2,500 (per 1,000 cubic metres). According to conservative estimates, if this trend continues, prices will exceed $4,000 per 1,000 cubic metres this winter,” Gazprom said in a statement on Telegram on August 16.
Gazprom produced 13.2% less natural gas from January 1 to August 15 this year than in the same period in 2021, the company added. It didn’t provide reasons for the decline.
Natural-gas flows from Russia to Europe have fallen since the war started. In May, Ukraine shut one of Gazprom’s major routes for transport gas to Russia. Meanwhile, Gazprom has cut natural-gas flows to Europe via the key Nord Stream 1 pipeline to about 20% of its capacity, citing technical difficulties due to sanctions against Russia over the Ukraine war.
European benchmark Dutch wholesale natural-gas prices hit a record high of nearly 335 euros, or $341, per megawatt hour in the spring this year, according to Reuters. They have fallen back to about 226 euros per megawatt hour, but are still about five times higher than a year ago.
Natural-gas prices in Europe have been surging past records recently and could gain even more as winter approaches because the market is pricing in a supply crunch, S&P Global wrote on August 11.
“Even with full storages it could get difficult if winter gets cold or Russia cuts further,” a Germany-based trader told S&P Global.
The trade news service did not provide price forecasts for this winter. It highlighted historical trends that suggest huge price gains for the delivery of natural gas during times of supply stresses in the winter.
Energy prices have been on the rise since pandemic curbs started easing up in late 2020, sending demand surging.
In 2021, a leading British winter wholesale natural-gas contract rose 84% in one month to hit a then all-time high. European natural-gas usage typically spikes in winter due to heating.
Consumers in Europe are bracing themselves for sticker shock on utility bills, although governments are also stepping up aid for the needy to cope with the inflation.
UK Research firm Cornwall Insight said earlier in August it expects the average annual power bills to top £4,200 by January — up over three times from the government price cap of £1,277 earlier this year. The ruling Conservative Party is in the midst of a leadership race, with Foreign Secretary Liz Truss and former finance minister Rishi Sunak both pledging measures to help consumers.
In Germany, an average family of four will have to pay an extra 480 euros a year from October 1 to April 2024 to help utility companies cope with soaring gas prices, per Reuters. The country’s government has rolled out programs such as lower public transport tickets and energy price allowances for those eligible.