According to the European Court of Auditors (ECA), the EU's gas supply system is still not completely watertight and needs further action to prepare for the next gas crisis. Despite the EU's introduction of a number of emergency measures, it is not clear what benefits these have brought. The price of natural gas on the markets has been hovering around USD 3/mmBtu since 2023. Is it there for the long term? Let's take a look at the key data from this market and try to answer the question of how gas prices might evolve.
Table of contents:
Still a critical situation in Europe?
In 2021, 45 per cent of the gas supplied to the EU came from Russia. However, the country's invasion of Ukraine in 2022 forced the EU to diversify its supply. This caused Russia's share to fall to 8.7 per cent in 2023. Before this happened, we witnessed record increases in raw material prices, which forced member states to subsidise energy. Among other things, the AggregateEU platform and the obligation to fill gas storage up to 90 per cent were introduced.
Source: Swiss Federal Office of Energy SFOE
Currently, the filling level of gas storage facilities in the European Union is relatively high at 75 per cent. Nevertheless, challenges remain in terms of affordability and security of supply.
Supply and demand market situation
The United States is the world's largest gas consumer, consuming 22 per cent of global gas production. Russia is second with 11 per cent and China third with 10 per cent. The European Union as a whole accounts for 8 per cent of global gas demand.
Source: OurWorldInData
In the US, we are seeing a definite oversupply in relation to demand, which could affect energy price falls.
Source: EIA
Price forecasts
The US Energy Information Administration (EIA) forecasts an average gas price of US$3.2/mmBtu in 2025. Such a level suggests prices will remain close to current levels, which is in line with the observed trends of declining both demand (from Russia and Europe) and supply (from Russia), with increasing imports from Asia. Despite warnings from the European Court of Auditors, in the short term there is no cause for concern in this market.
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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