In the EU's current political agenda, high energy prices are a major topic. Natural gas markets and foreign exchange have received special attention due to the unprecedented rise in prices that has affected electricity prices. In today's EU Member States, nearly three-quarters have activated support mechanisms to help vulnerable customers, but the political debate extends far beyond that. Some Member States are seriously challenging existing energy market designs.
Natural gas prices in Europe and the US have gone up further in recent weeks, raising fears of a recession in some of the world's biggest economies.
Markets for gas in Europe advanced by 6 percent on Wednesday to reach €236 a megawatt hour, bringing the week's gains to 14 percent. Traders raced to secure oil supplies ahead of the winter, resulting in a price equivalent to almost $400 a barrel in energy terms. It has been more than a year since the prices were already extremely high, and they have more than doubled.
Traders are concerned about competition for seaborne liquefied natural gas cargoes with Asian utilities ahead of the winter heating season after Russia restricted supplies in retaliation for Western powers backing Ukraine following Moscow's invasion. The Russian government has been accused of weaponizing supplies, according to European politicians.
Investors are now more downbeat about the German economy than they have been since the eurozone debt crisis a decade ago, as gas prices have doubled to more than ten times their usual level.
Despite rationing talks in Berlin and governments from London to Madrid looking to subsidize punishing utility bills, European gas prices are expected to remain near record levels or rise even further in winter. Even if Russia completely cuts off supplies, further price hikes would make supporting households more expensive. This is especially true in the UK, where pressure has built for a cap on bills by the new prime minister.
Because of the shale drilling boom in the United States, gas prices remain much lower than in Europe, although rising energy costs have prompted decades-high inflation, alarming the White House. As of Wednesday morning, US gas prices were nearly at their pre-shale revolution levels, up more than 7 percent for the week. As demand for energy rises, winter approaches, and governments race to replace Russian energy in Europe, further price increases may be expected in the coming months on both continents.
As of the end of the week, the UK benchmark contract for September delivery rose close to 17 percent to just under £5.15 per therm. Mainland European gas prices are almost $70 per million Btu, and electricity prices have soared six times as much as they did a year ago as a result of record gas prices.
Metals company Nyrstar has recently put out a statement that they would halt production indefinitely at one of the largest zinc smelters in Europe becoming one of the latest victims of the energy crisis.
Due to reduced drilling, pipeline bottlenecks, and rising production costs, the US price of oil rose following recent data showing a slowdown in shale oil and gas production. During a hotter-than-normal summer, power plants burned more fuel to meet summer electricity demands, causing underground stockpiles to fall to 12 percent below average levels.
As a result of an explosion at the Freeport LNG export plant in Texas, one of the nation's biggest gas consumers, prices have increased despite a temporary shutdown. As soon as October, the freeport will resume operations, allowing more supplies to reach Europe, adding to demand in the US while softening prices outside the Atlantic.
Despite the RSI reaching overbought areas in the short term, and its continuous trading above its 50-day simple moving average, natural gas price continues to rise along an ascending trend line. So, if the support level of 8.054 remains intact, we anticipate a continuation of natural gas' rise to target the pivotal resistance level of 9.600 in the coming trading sessions.
There is a tight supply situation and high demand, which is causing price spikes in the EU natural gas market.
Nevertheless, price spikes have captivated energy markets, and politicians and regulators are uncomfortable. These prices are likely to remain high next month because there is no magic solution. It is essential to monitor the situation closely as it remains volatile. For the EU, the best solution is to avoid panic and focus on assisting vulnerable consumers and businesses directly, rather than creating competition issues.
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