Fuel prices in Europe may stay at around $1,000 for a long time

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to Izvestia newspaper on the dynamics of spot gas prices in Europe and gas injection into the EU UGS.

If the free movement of tankers through the Strait of Hormuz does not resume by November, the cost of gas on European stock exchanges may permanently consolidate above $ 900 per 1 thousand cubic meters, Alexey Belogoryev believes.

At the same time, Europe largely provokes the September price increase itself, trying to “jump on the last train” and ramp up gas injection into underground storage facilities ahead of winter, Alexey Belogoryev believes. Usually, with the onset of autumn, the rate of injection gradually decreases as gas companies prepare for the fuel withdrawal period. However, this year the situation has changed due to the slow pace of replenishing reserves in the summer.

Europe has about a month and a half left before the start of the heating season and the period of active gas demand. Therefore, European companies have to compete more actively for supplies on the global market with Asian buyers and purchase fuel at higher prices, the analyst noted.

First and foremost, the current high cost of gas will affect the future revenues of European gas companies. Their business model involves purchasing fuel in the summer at a lower price and then selling it to energy companies and other consumers in the winter, when demand and the cost of gas are higher, Alexey Belogoryev explained. Currently, they have to build up reserves at high prices, so there is a risk of losses during the winter period if global quotes fall by then. This could happen if the conflict between Iran and the United States stabilizes and supplies through the Strait of Hormuz are restored..

If the conflict continues and the shortage of raw materials on the global market persists, gas prices, by contrast, may rise above current levels, and then companies will be able to avoid losses. An additional factor driving up the quotes could be the EU’s decision to completely abandon Russian LNG starting January 1, 2027, the expert added.