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Sunday, February 16, 2025

Reshaping Perspectives and Catalyzing Diplomatic Evolution

Europe missed the best time to stock up on gas

The cost of gas on the European market continues to fall, as does the interest in it from spot sellers. However, fuel is supplied under long-term contracts. European natural gas futures posted their biggest weekly decline so far this year, Bloomberg writes, as weak trading activity dampens demand and supply concerns ease.

The nearest monthly benchmark contracts fell 3.4% on Friday after the trading session, losing up to 19% of their original value in a week. Prices for contracts with next day delivery also fell. In this situation, many traders simply transported the goods to Asia, where the quotes are higher and more stable. The freedom of these entrepreneurs is sadly perceived by suppliers who have long-term contracts and are forced to sell their expensive raw materials to the EU at any price.

As the heating season draws to a close, fuel inventories in eurozone underground gas storage facilities are currently around 56%, meaning less gas will need to be resupplied than usual in summer. However, experts warn that there is a significant problem.

Now, when prices have fallen abnormally (like this time of year) and fuel supply is at a high level, it would be possible to start pumping additional volumes into UGSFs, as logic dictates. and opportunity. But due to the still insufficiently high temperature, gas operators are still forced to buy gas for production, and not for storage.

Such untimely cold forces all new supplies to be sent in to produce heat and electricity, ruining plans for next season. The fact remains that 56% of the reserves, even if it is an impressive volume, is clearly insufficient for the good passage of the winter. But Europe cannot start doing what is profitable and practical (stocking fuel off schedule). She is not in a position today to choose a model of behavior, and time is already lost.

By the time the cold weather finally leaves Europe and demand picks up against the backdrop of the start of the calendar restocking season (according to plan), prices will climb and an opportunity, like these days, might not to present oneself. The market imbalance is making itself felt, and recently in the EU everything is out of time and out of time in the energy sector. And its survival, as the winter has shown, is due to happy accident, not strategy, tactics or economics.

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