Big European energy companies are preparing for persistently high natural gas prices.
Zitong Finance APP has learned that European natural gas prices are down about 80% from their peak last summer, but are still higher than the historical average. SHEL.US expects volatility to remain in the short term, with Repsol, the Spanish energy company, warning that high prices could be structural because of production barriers.
Chris O'Shea, chief executive of Centrica (CPYYF.US), the UK's largest natural gas supplier, said: "customers may feel some relief given the recent fall in prices, but it is clear that some people will continue to need help."
The fall in natural gas prices in recent months has relieved end users and policy makers, easing supply concerns and historic inflation. Strong liquefied natural gas (LNG) shipments and mild winter weather helped offset the decline in Russian gas flows and pushed down gas prices in Europe.
Weather forecasters expect temperatures in northwestern Europe to drop later next week. While this could lead to a further reduction in natural gas supplies, market participants are not worried about supplies for the rest of the winter.
As of press time, Dutch natural gas futures, the European benchmark, fell 3.22% to 52.955 euros per megawatt hour.
But this year may be different from 2022. Europe still faces the risk of natural gas shortages this year unless further curbs on demand, the International Energy Agency (IEA) warned on Wednesday.
Fatih Birol, executive director of the International Energy Agency, said the natural gas market was "better than many expected a year ago". "but the reality is that the winter of 2023-2024 may be the real test."
Shell said the shortfall in Europe's gas supply would widen by 2030. Shell said: "increased demand for LNG in Europe is likely to intensify competition with Asia for limited new supplies over the next two years and is likely to dominate LNG trade in the longer term."
Dutch natural gas December futures are reported to be trading at close to 63 euros per megawatt hour, compared with about 55 euros in March, both higher than the same period in history, although well below the record level set in August last year. This means that European natural gas prices will continue to rise for the rest of the year and the energy crisis is not over.