Six Reasons Natural Gas Prices Are Staying Down
One could argue that this agreement could actually have come too late. Natural gas supply to Europe heading into winter 2015 seems more secure than ever before, a sharp contrast to the icy winters of 2006 and 2009, in which Russia cut off natural gas supply to Eastern Europe over a conflict with the Ukraine. The following factors have turned the European natural gas market from a ‘’beggars can’t be choosers” into a true “buyers’ market’’.
1. Declining European demand
In spite of the current surge in natural gas imports from Russia, Norway and Qatar (described in point 4 below), the IEA foresees a decline in European demand for natural gas because of a decline in ’thermal generation growth,’ increased energy efficiency and the shift to renewables. Natural gas demand could, however, be partially rescued by a colder than expected winter or the accelerated shutdown of coal-fired electricity plants. The below chart demonstrates the fall in natural gas demand across the EU.
(Click to enlarge)
Related: The Shocking Truth Behind Mexico’s Recent Offshore Oil Auction
2. Better connected networks
After the 2006 and 2009 natural gas supply disruptions, the European Union decided to decrease its natural gas import dependence from Russia (ironically enough, natural gas imports from Russia are surging at the time of writing. More on that below) by improving its natural gas infrastructure. Ever since, over €50 billion (≈U.S$55.8) was invested in 107 gas projects with one important goal: sharing energy resources. This sharing of energy resources can potentially limit the direct demand for natural gas on the short-term and therefore prevent a quick hike in natural gas prices.
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