European gas prices soar again

After months of decline, natural gas prices in Europe rose more than 50% this month, recalling fears of last year's energy crisis.

Data from commodity price research firm ICIS shows that European gas futures have risen 52% since the beginning of the month, hitting 35 euros ($38) per megawatt hour on June 16. Analysts told CNN that the price reversal was largely due to longer-than-expected maintenance at Norway’s main gas plants.

Natural gas prices in Europe are still much lower than they were last summer, when the region was locked in an energy war with Russia over the conflict in Ukraine. But “the recent price increase shows how sensitive the European market is to disruption,” said Bill Weatherburn, an economist at Capital Economics.

Earlier this week, Gassco, Norway’s gas system operator, said the shutdown of one of its gas processing plants would be extended until July 15. It had been scheduled to resume operations on June 21. Two other gas plants will remain closed indefinitely to fix “processing capacity issues.”

Gas valves at a storage facility in Hungary. Photo: Reuters — Gas valves at a storage facility in Hungary. Photo: *Reuters*

Last year, Norway replaced Russia as the European Union's (EU) largest source of gas imports, accounting for more than 24% of the market. Meanwhile, Russian pipeline gas accounted for only 15%.

Europe is also facing the risk of losing another major source of gas. Gas prices spiked on June 15 after the Netherlands announced it would permanently close its Groningen gas field in October, a year early. Yesterday, gas prices even reached nearly 50 euros per megawatt hour before falling back. That was double the level at the beginning of the month.

A Dutch government spokesperson told CNN that they have not yet decided when to close the Groningnen field. Once a major gas supplier to Europe, the Netherlands has been reducing production for a decade due to the risk of earthquakes. Groningnen is one of the world's largest gas fields, but currently supplies only a fraction of Europe's needs.

"The European gas market – and by extension the global gas market – is certainly not out of the woods yet," Tom Marzec-Manser, director of gas analysis at ICIS, told CNN.

Gas prices in Europe hit a record 340 euros per megawatt hour in August 2022 as countries raced to stockpile ahead of winter. Currently, these storage facilities are 73% full—higher than the five-year average of 56%, according to data from the Association of European Gas Producers.

"Last summer's panic cannot happen again," Massimo Di Odoardo, a gas analyst at consultancy Wood Mackenzie, told CNN . Record gas reserves in Japan and South Korea, combined with a weaker-than-expected Chinese economy, also reduce the likelihood that Europe will have to join Asia in a liquefied natural gas (LNG) war this summer.

Still, investor confidence remains shaky. “Europe still faces the reality that there is very little Russian gas available, so any unforeseen disruption could send prices soaring,” said Henning Gloystein, director of resources, climate, and energy at Eurasia Group.

Ha Thu (according to CNN)

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