The price of European gas continues to soar, winter promises to be tense

Shortages in some German regions this winter

Germany’s energy regulator warned on Thursday that the country risks missing its government-set reservoir filling target. by Olaf Scholz. Regulator chief Klaus Müller warned that shortages were to be expected in some regions during the winter, and that it was “not a question ofnot one winter but at least two, and the second winter could be even more difficult“. Europe is painfully trying to wean itself off Russian gas, on which Germany is particularly dependent, and which Moscow is using as a means of pressure in the context of its invasion of Ukraine.

In Germany, from October 1, importers will be able to levy 2.4 centimes more per kilowatt hour (KWh) of gas from companies and individuals. Even if the government has promised to amortize it for the most modest, “the shock on the October bill should lead to a reduction in household demand», Comment the analysts of Deutsche Bank.

Significant electricity consumption due to heat waves

Electricity, for its part, mechanically follows the evolution of gas prices, because the market is fixed on the cost of the gas (and coal) power stations called in to the rescue to ensure the balance of the system. Prizes have been drawnby low wind levels (for wind power) as well as high costs for coal and gas electricity“, underlined the analysts of Rystad Energy. At the same time, a particularly hot summer limited electricity production: heat wave affects the cooling systems of nuclear power plants and the drought prevents barges from bringing coal to German power plants.

However, the heat wave stimulates the electricity consumption for air conditioning and ventilation, limiting the usual drop in the summer months. Electricity for delivery next year in Germany exceeded 500 euros per MWh for the first time in recent days, compared to just over 300 euros in early July. “This could be Europe’s biggest energy crisis for at least a generationwarns John Plassard, analyst at Mirabaud.

Falling oil prices

Less dependent on the European market, oil price faltered on Friday -2.07% to 94.59 dollars for the European reference, Brent from the North Sea for delivery in October, and -1.99% to 88.72 dollars for the American West Texas Intermediate (WTI) which expires in September. “There are plenty of reasons to bet on a decline, but market participants seemed to have forgotten about them for two sessionscommented Stephen Brennock, analyst at PVM. He points out that volumes are particularly thin this summer, which promotes increased price volatility and pushes the analyst to give little credit to the rebound that began on Wednesday after a surprise drop in American stocks.

“A global recession that would destroy demand remains the main worry, with discouraging data coming out of the euro zone and China“, he adds. On Friday, the strength of the dollar, boosted by the prospect of a tightening of monetary policy in the United States, also weighed on oil. As the greenback is the reference currency of the oil market, its rise weighs on the purchasing power of investors who use other currencies.

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