Traders expect high European gas prices to continue in coming years


26 July 2022

Natural gas prices in Europe will remain high in the coming years amid continued supply shortages, traders believe, Interfax reports.

 Gas futures for delivery in a year and two are trading at 134 euros and 82 euros per megawatt-hour, writes the Financial Times. These are close to record values. At the same time, until last summer, futures for a decade cost less than 40 euros per megawatt-hour.

 Gas prices in Europe jumped in June on expectations of the termination of supplies from Russia via the Nord Stream 1 gas pipeline. After the completion of the repair work, deliveries resumed, but market participants continue to fear disruptions in the future, which supports quotes at record highs, the FT notes.

 "We might get through winter 2022 and winter 2023 without much loss if we're lucky, but then things get worse with each subsequent winter," the Secretary General of the International Group of Liquefied Natural Gas Importers (GIIGNL) Vincent Demury said.

 In his opinion, the only chance for Europe is connected with the conclusion of long-term contracts for the supply of LNG from Qatar and the United States and with a gradual reduction in dependence on the spot market.

 The current situation increases the likelihood of a recession in Europe. For example, the German economy could fall by 5-6% next year in the event of a cessation of supplies via Nord Stream 1, Deutsche Bank analysts believe.