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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Europe’s Energy Crisis Isn’t Over, IEA Warns

  • IEA: EU gas markets set for new period of volatility.
  • Europe is now relying much on LNG imports, and a cold winter would relaunch the race with Asia to attract cargoes.
  • Europe’s single biggest gas supplier now is Western Europe’s top oil and gas producer Norway.
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Despite the much lower natural gas prices this summer compared to last year, Europe is not out of the woods yet. A cold winter and a full cut-off of still-flowing pipeline gas from Russia could trigger another period of market volatility and high prices ahead of and during the coming winter season, the International Energy Agency (IEA) warned in a report this week. 

Europe’s benchmark natural gas prices are now 90% lower, at below $33.68 (30 euros) per megawatt-hour (MWh), compared to the record highs seen in August 2022. EU storage facilities are more than 82% full, per data from Gas Infrastructure Europe, getting closer to the EU target to have storage 90% full by the beginning of November. Europe will likely hit that target months in advance and could even see gas storage filled to 100% as early as in September, analysts say. 

Spot LNG demand in Asia is tepid, and prices last week fell by 12.5% from the previous week to $10.80 British thermal units (MMBtu), according to estimates from industry sources cited by Reuters. 

In Europe’s developed economies, gas demand dropped in the first half of the year compared to last year due to lower gas burn in the power sector, which accounted for 70% of the overall reduction in gas demand in the second quarter, amid depressed electricity demand and stronger renewable power output, the IEA said in its annual Global Gas Security Review Related: WTI Drops Despite Crude Inventory Draw

Lower demand and increased intake of LNG and pipeline flows from sources other than Russia – Norway and North Africa – have eased much of the pressure on gas prices and fears of a repeat of the energy crisis. 

However, Europe shouldn’t be complacent about the coming winter, the IEA says. 

“Major uncertainties remain ahead of the upcoming heating season. A cold winter, together with a full halt in Russia piped gas supplies to Europe early in the heating season, could easily renew market tensions,” the agency said. 

“Fierce competition for gas supplies could also emerge if Northeast Asia experiences colder-than-usual weather and economic growth is stronger than expected in China.” 

Europe is now relying much on LNG imports, and a cold winter would relaunch the race with Asia to attract cargoes. 

In the first half of 2023, LNG held a nearly 40% market share of Europe’s gas consumption, the IEA estimates. This share is similar to Russia’s share of the European gas market before its invasion of Ukraine. Currently, the share of OECD Europe’s gas demand met by Russian piped gas is below 10%. 

Europe’s single biggest gas supplier now is Western Europe’s top oil and gas producer Norway, a close EU ally and a founding member of NATO.   

Despite the LNG inflows and high gas storage levels, market volatility could return, the IEA warned. 

“High inventory levels at storage sites in key Asian and European markets provide grounds for cautious optimism ahead of the 2023-24 winter heating season in the Northern Hemisphere,” the agency said, but added that “full storage sites are no guarantee against market volatility during the winter.” 

The agency also called for closer coordination between major gas producers and consumers amid reports that Japan plans to propose the creation of a global emergency reserve for natural gas, similar to the emergency reserve requirements for oil for IEA member countries.

“A new global gas market is taking shape after last year’s crisis. Given this, responsible producers and consumers must reconsider their approaches to supply security and flexibility, cooperating even more closely,” Keisuke Sadamori, the IEA’s Director of Energy Markets and Security, said.  


In the near term, uncertainties are high about winter weather in Europe and Asia and the ability of renewables to provide more electricity for Europe. Since the energy crisis began, Europe hasn’t seen a really cold winter yet. 

In case of another mild winter – which is possible but far from certain – Europe’s gas prices could plunge from current levels and halve to $16.83 (15 euros) per MWh, according to Morgan Stanley. At the other end of the bank’s scenarios, prices could spike to $112 (100 euros) per MWh if the 2023/2024 winter is colder than normal and renewables cannot generate too much additional electricity. 

By Tsvetana Paraskova for Oilprice.com

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  • George Doolittle on July 20 2023 said:
    Russian Ruble continues to collapse so that's an awful lot of dirt cheap everything flooding into all of Europe quite suddenly.

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