Financial News Agency (Shanghai, Editor Xiaoxiang) News, With a cold wave from the Arctic, there has been widespread snowfall in central and western Europe in recent days, and the temperature has quickly dropped below zero degrees Celsius. The European energy market has always been worried about the "cold" this autumn. "Winter" seems to have finally come.
Electricity prices in European countries such as Germany, France and the Netherlands have surged again recently. Among them, electricity prices in Germany have soared to the second-highest level on record.
In addition, the current electricity price in France is approaching an astonishing 300 euros/MWh, and the electricity price in Switzerland has also reached the highest record since 2007.
While the United States and Asian countries are trying to release oil from their strategic reserves, the renewed power crisis in Europe has undoubtedly focused the attention of all financial market participants on the energy market again.
At a time when wind power is expected to decline sharply in places such as France, Germany and the Netherlands, a sudden cold snap is igniting power demand in the local market. Temperatures in eastern France will drop to minus 6 degrees Celsius (21 degrees Fahrenheit), Meteo France reported. The German Weather Service said on Twitter that snow was expected in southern and northeastern Germany.
Additionally, weather forecasts through early December show temperatures in Western Europe will be below normal, according to a report by Maxar Technologies LLC. Maxar predicts that demand for heating electricity across the continent may surge in the coming period.
Is European energy supply in big trouble?
This cold snap is the first test for the European energy system, which is already under strain, to face higher power consumption demands this winter.
Restricted natural gas supply and low reserve levels have recently caused European natural gas prices to rise again, and the local energy market has become more chaotic as a result. As of the beginning of this week, European natural gas prices have risen by more than 300% this year, and British natural gas prices have risen by about 250%.
The new Nord Stream 2 pipeline from Russia to Europe was supposed to ease market tensions. But Germany last week suspended the approval process for the pipeline, which is expected to face longer delays, amid opposition from the United States and some European countries to the entire project.
Russia once reassured Europe that it would increase supply after early November, but it seems that this has not been fully realized. Data from Refinitiv Eikon showed that gas shipments from Russia in November were slightly higher than the November 2020 average, but at that time the economic shutdown caused by the epidemic limited demand, and compared with the November 2019 average level is still nearly 40% lower.
A European natural gas trader said, "If the gas supply does not increase and there is a cold wave or the wind speed is too low, prices may skyrocket again. Now we can only live one day at a time."
Earlier this year The electricity price shock has caused several European and British energy suppliers to declare closure because they cannot continue to pass on the price increases to customers. Britain's Bulb is the latest player to go out of business, with a 6% domestic market share.
Inspired Energy said in a report, "Falling wind power and below-seasonal temperatures are expected to further increase demand for natural gas for power generation and heating, providing more bullish pressure on front-month contracts."
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