BAKU, Azerbaijan, December 23. The EU gas supply situation in the winter months inspires optimism, yet the hydrocarbon market is volatile, Moody's said in its latest research before the New Year holidays, Trend reports.
The research said that the EU had record high gas stocks of around 97.5 percent at the end November 2023, meaning both very low risk of energy shortages this winter.
“Europe’s improved energy reserves going into this winter are the result of the effectiveness of government actions on the supply and demand side, and consistent energy savings by both households and companies,” the Moody’s report said.
The agency's analysts found greater supplies of liquefied natural gas (LNG) to EU, a higher availability of nuclear and hydropower plants and a mild winter as the positive factors.
"Lower consumption has also been helped by economic stagnation in the continent," the report said.
Moody’s forecasted gas storage to be higher than previously anticipated at 55 percent at the end of March 2024.
A crisis situation was averted last winter, following a search for new suppliers, reopening of old storage facilities and roll out of initiatives to reduce consumption in some energy-intensive areas, the agency reminded.
Meantime, using Factset data, Moody’s found that gas tariffs on European businesses and households are well above their 2015-2019 average and could remain above that level until at least 2031.
The EU consumers have not yet felt the full impact of the fall in wholesale prices in 2023, but geopolitical concerns are now aggravating this situation, however, European gas prices will remain high and volatile, the agency's research pointed out.
Fuel prices affect inflation rates in the EU, and annual headline inflation was 2.4 percent in November in the euro zone, the research noted.
Wholesale prices are overall around four times lower than they averaged over 2022, but still more than double what they were historically, meaning there are still price pressures on households and industries, the agency's report also said.
Besides, Moody’s predicted gas prices to stay volatile primarily because of “increased geopolitical risks, which reflect their intrinsic vulnerability to supply disruptions”.
"Additional volatility has arisen following the Israel-Hamas war, which has lifted risk premiums and driven spot gas prices higher despite Europe’s relative distance from the conflict," the agency mentioned.
"Under the unlikely adverse scenario where the conflict could escalate to the broader region with the direct involvement of Iran, European gas prices could spike to similar levels... This scenario would hurt economic activity and add further challenges for energy-intensive sectors,” Moody's said.
