Gas prices in Europe have soared after the latest weather forecasts predicted a steep drop in temperatures across the continent next week.
On Thursday afternoon, gas prices were hovering around €33.50 per megawatt hour (MWh) on the Dutch Title Transfer Facility, Europe's most commonly used price benchmark. This is up from €30.50 per MWh on Tuesday and €32.80 per MWh on Wednesday.
The price spike followed reports that the maximum daily temperature in Belgium will fall to just 1°C on Tuesday, down from 11°C on Thursday this week. A similar cold snap is expected in Paris, while in Berlin daytime temperatures are predicted to drop below freezing.
Experts warn that next week's weather will not only lead to a surge in consumption as Europeans try to stave off the winter chill but could also trigger a decline in renewable energy production, thereby putting further pressure on prices.
"A decline in wind generation is anticipated in the coming days," Zenergi, a UK-based energy consultancy, said in a note quoted by Bloomberg News. "This may necessitate an increase in gas generation to meet the expected rise in demand during an impending cold spell."
Rising tensions, increasing prices
Fears are also rising that the current tensions in the Middle-East could affect liquefied natural gas shipments (LNG) to Europe. Qatar, a major supplier of LNG to the EU, enjoys close ties to Hamas, the group which is currently locked in a nearly three-month long war with Israel in Gaza.
Fears of the Israel-Hamas conflict in Gaza escalating into a wider regional war were recently exacerbated following the assassination of senior Hamas commander Saleh al-Arouri on Tuesday in Beirut, as well as multiple bombings near the tomb of Qasem Soleimani, Iran's former top military leader, in southern Iran.
Iran is a strong supporter of Hezbollah, a Lebanese paramilitary-cum-political group which has sporadically traded rocket fire with Israel since the start of the war on 7 October.
Some analysts believe that such regional tensions, coupled with a possible amplification of Russia's ongoing invasion of Ukraine, could cause gas prices to remain elevated throughout 2024.
"We expect prices to rise in the current year, as EU gas consumption should recover and there is a risk of tension on the LNG market and the remaining pipeline supplies from Russia drying up," analysts at Commerzbank Research said in a note quoted by The Wall Street Journal.
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Not all experts share this pessimism. Damien Ernst, a professor of electrical engineering at the University of Liège, recently told La Libre that sharp declines in gas and electricity prices over the past year suggest that Europe's energy crisis is "really over".
However, Ernst also warned that an upswing in prices could occur in the event of a cold snap or an escalation of any of the aforementioned conflicts.
"The geopolitical risk still exists, in addition to the risk of having a big cold snap that revives consumption," he said. "But if this does not materialise we should see prices falling and going below €30 in the coming weeks."
