Natural gas prices have skyrocketed as the winter freeze envelops the northern hemisphere. Gas prices around the world have felt the effect of the annual winter increase in energy usage, and market data have revealed that Europe’s benchmark gas price has risen to its highest level over the past two months. Unlike the United States, which relies on domestic gas production, Europe mostly imports its gas, leading to buyers competing for a limited global supply.
The annual winter gas purchasing impulse has emerged like a snow-covered mountain peak
Every year, the world is enveloped by an increase in energy demand when the winter freeze envelops parts of the globe like clockwork. The inevitable increase in heating and energy usage comes this year as the gas market is in turmoil, with increasing gas prices shocking market experts and buyers alike.
As the United States dominates the global gas production market, Europe’s gas ambitions are a much different story altogether. When the temperatures drop, European gas buyers are forced to compete with other regions of the world to purchase the necessary natural gas as the market waves a fond farewell to the oil domination that has been present over the past few decades.
The European natural gas buyers are set to compete with a dwindling supply
While the US has become the number one gas producer by capacity, Europe is struggling to secure a sufficient gas supply. New demand, driven by the exceedingly cold weather in the Northern hemisphere, and storage withdrawals have created a troubling situation for Europe. The continent has few gas producers who have the capability to meet the increased demand during winter.
European gas prices have climbed to a three-month high recently
The competition around the European gas market has been intense in recent weeks. Asia’s gas demand and usage have skyrocketed in recent years, leading to a market that is rife with buyers all searching for the next natural gas boom, but the reality is that they may need to fork out slightly more cash than expected to secure the natural gas needed.
In recent weeks, the EU TTF gas price spiked to an astonishing EUR 41.9 per MWh (USD 14.25 per MMBtu), which marks a 40% rally in prices over the past two weeks, most likely driven by recent events at the World Economic Forum in Davos. The gas price has now eased back down to below EUR 40; even so, the price fluctuation underlines the fragility of the global energy market at the moment.
Norway could benefit tremendously from the scarcity of European gas suppliers
Norway has been working diligently to advance the accelerated development of its natural gas market and has been mulling over a new proposal to fast-track several gas projects in the North Sea. Norway could potentially fill the demand for natural gas buyers in Europe, as several nations aim to meet the transitional commitments made by European leaders.
Norway has the world’s largest Sovereign Wealth Fund, mostly driven by the nation’s vast natural resources; as such, it is perfectly positioned to become a dominant force in the natural gas and LNG markets on the European continent.
Gas Infrastructure Europe warned of this exact scenario last year
At the end of the summer months, as winter began, the GIE issued a warning to European gas buyers as its market data pointed to several scenarios where insufficient gas supply could create a troubling reality for the European energy industry. The energy market overall is facing an uncertain future, driven by recent developments in South America and the US President’s ambitions to acquire Greenland from the Danish Kingdom.
