Chart of the Week
In August, gas prices reached new highs across Europe, exceeding €300 per megawatt hour. The surge has driven up the price of electricity, a significant portion of which Europe produces using gas-fired power stations. On 29 August, the German electricity baseload (off-peak) price reached an unprecedented level of €1,000 per megawatt hour. Although prices have fallen back by over 30% since the beginning of September, they remain close to last winter’s highs.
OUR ANALYSIS
The midsummer surge in gas prices reflects fears over supply shortages for the coming winter. With Russia shrinking supplies to Western Europe, Norway has become Europe’s main gas provider. Despite the challenging backdrop, gas storage sites have been filled faster than expected in recent months. Underground storage levels in Europe currently stand at 80% and are expected to reach 90% by 1 November, which is approximately 100 billion cubic meters (bcm).
Europe’s winter consumption needs of around 250 bcm mean that current reserve levels are insufficient to rule out shortages. If Russian gas supplies are completely cut off, rationing will be necessary in countries such as Germany. That being said, concerns have eased since the beginning of September thanks to a combination of high storage levels and falling European demand in the face of soaring prices.
The opinion expressed above is dated September 16th, 2022 and is subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/supply-chain-pressures-continue-to-ease/
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This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – a simplified joint stock company with share capital of €14,487,500 – Paris Trade and Companies Registry No. 352 213 599. 25, RUE DE COURCELLES – 75008 PARIS, FRANCE
