Is Europe Facing A Winter Energy Crisis?

Welcome to another week of trading! In today’s article, we’re going to look at the current situation with European energy as gas prices hit record levels. We’ll also go over the key fundamental events to look out for this week. Let’s go!

Record natural gas prices

Strained supplies and increased demand are pushing energy prices through the roof across Europe. They’ve now reached their highest point since 2018. This is raising some eyebrows ahead of the winter.

Prices are up by $1.86 per cubic foot since the start of the year, a rise of just under 50%! These prices are nearly 5 times higher than pre-covid levels.

Source: Macrotrends

What does this really mean?

These high natural gas prices have a knock-on effect on electricity prices, which impacts pretty much everyone. One of the most affected are, of course, everyday consumers, many of whom are already under the cosh financially due to the lingering effects of the pandemic.

Spaniards have suddenly found themselves paying roughly 40% more to heat and light their homes than they did just a year ago.

Predicted wholesale electricity prices in Germany for delivery next year have reached more than €90 per megawatt hour, about double the price from the beginning of the year.

Gas prices in the US are also rising, but are only around a quarter of those being paid in Europe. This is mainly due to the country’s high domestic stockpiles.

The strangest part, is that these price jumps are a little unconventional. Demand is typically relatively low in the warmer summer months (for obvious reasons). The fact that they have risen so high now is ringing alarm bells about the prospect of further increases when demand jumps due to cold weather in the winter.

Why are energy prices spiking?

The bumper prices are down to a few reasons that are, rather frustratingly, all occurring at once.

  1. The resurgence of global demand following pandemic lockdowns, mainly led by China.
  2. Lower gas supplies from Russia which have led to lower inventories in storage across Europe.
  3. There’s greater competition with Asia for LNG shipments.
  4. The lower-than-expected power generation coming from wind turbines due to the warm, dry and less windy European summer.

This higher than expected demand is hitting supply levels and if we’re in for any kind of cold snap over the winter, we might be in more than a little trouble.

What do you think about the energy price hikes? Tweet us @_Contentworks and let us know.

What’s on the trading agenda this week?

This week’s going to be a fairly busy one. Here’s everything you can’t afford to miss!

Monday

No major events scheduled.

Tuesday

● GBP — Employment Change (JUN)

● USD — Core Inflation Rate YoY (AUG); Inflation Rate YoY (AUG)

Wednesday

● GBP — Inflation Rate YoY (AUG)

● CAD — Inflation Rate YoY (AUG)

Thursday

● NZD — GDP Growth Rate YoY (Q2)

● AUD — Employment Change (AUG); Unemployment Rate (AUG)

● USD — Retail Sales MoM (AUG)

Friday

● EUR — Core Inflation Rate YoY Final (AUG)

● USD — Michigan Consumer Sentiment Prel (SEP)

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Speak soon!

The Contentworks team

Contentworks is a content marketing agency that's all about telling your story and achieving your goals. Unless you want to climb Everest.