The price of natural gas for Western Europe began to decline by about 1%, falling back from a 14-year high reached earlier this week. European consumers can thank climate experts who are predicting less hot weather in the near future. Reuters reports that strong demand for air conditioning systems should drop significantly over the next two weeks.
The good news about weather conditions was enough for the price to finally start to fall, albeit slightly. This drop is occurring even despite the reduction in daily production volumes and the persistence of hotter weather on the West Coast and in Texas.
US natural gas futures closed yesterday's trading session with a drop of 8.5 cents (0.9%), eventually reaching $9.244 per MMBtu. By the way, the futures closed at the highest level since August 2008 on Tuesday.
On Thursday, the US Energy Information Administration (EIA) is expected to release its weekly report from the US Department of Energy, which will show the level of gas reserves in the country. Experts predict that US underground storage inventories rose during the reporting week, but not significantly.
According to a Reuters poll of analysts, US gas inventories rose by 34 billion cubic feet in the week ending August 12. Last year, the figure was 46 billion cubic feet, according to a Reuters poll.
However, the quotes will hardly show significant movements in the short and medium term. This worst energy crisis in decades is sprouting ever deeper, particularly after the collapse of natural gas supplies from Russian giant Gazprom to Europe. Gazprom's management has said that gas prices could rise even higher this winter, to $4,000 per 1,000 cubic meters, thus setting a new all-time record.
The Nord Stream pipeline is only 20% efficient today, energy transit through Ukraine is only 38% efficient, and the Yamal-Europe pipeline is not operational because it has been under Russian sanctions since spring. In addition, even Norway today is unable to satisfy the appetite of its Western European partners, as it was forced to cut electricity exports to the EU due to the scheduled maintenance of its largest field, Troll.
In addition, the record-breaking heatwave and nearly uninterrupted drought in August contributed to the skyrocketing gas prices. European wind power has proved to be completely pointless during periods of windless weather as it stands idle for most of the summer. A large solar power plant in Spain started up too late and has not yet lived up to its high expectations. The European countries abandoned coal and nuclear power in favor of the climate agenda which leaves little chance of resolving the long-lasting crisis that is growing in almost all spheres of life.
It is clear that exorbitantly high and rapidly rising energy prices are destroying various sectors of European industry. Both fertilizer and aluminum production facilities are suffering. For example, Norsk Hydro ASA intends to close its aluminum plant in Slovakia next month because aluminum is one of the most energy-consuming metals to produce.
Over the past year, Slovakia has lost about half of its zinc and aluminum smelting capacity due to production cuts. From now on, Hydro and other companies are shutting their plants down.
Germany is trying to ease the gas supply crisis. The government urged citizens to reduce consumption and warned of forced rationing and even imposed a tax on gas use. In addition, German authorities made a deal to import LNG through two new terminals this week. The country is revisiting the idea of keeping its remaining nuclear reactors in operation after they are phased out this year, which will help reduce gas consumption by almost 3% next year.
