Europe’s energy crisis will not be “a one winter story”

Reduced energy supply due to the sanctions against Russia and Moscow shutting down key pipeline gas export routes will leave Europe scrambling for oil and gas well after the coming winter as the current crisis is not “a one winter story,” according to analysts at consultant Energy Aspects.

“This is not a one winter story, let’s just make it very, very clear,” Amrita Sen, founder and director of research at Energy Aspects, told Bloomberg television in an interview on Friday.

Europe will need to ration demand in order to be able to balance the market, not only this winter but also the next winter and potentially the one after that, she noted.

The energy crisis is already pushing Germany – Europe’s biggest economy – into a recession, which will deepen as we head into the winter months amid the ongoing natural gas and energy crisis, Bundesbank, the central bank of Germany, said in its monthly report earlier this week. Germany also moved this week to nationalize its biggest gas importer, Uniper, to prevent a collapse of the German energy and gas suppliers. Across Europe, industries are forced to curb or shut down production due to soaring energy prices, and several European industry associations say the European Commission’s proposals to reduce energy prices and help households and businesses through the crisis are not enough to help them survive the winter.

Commenting on the oil market, Energy Aspects’ Sen told Bloomberg that the oil market would see a very volatile last quarter of this year. 2022 so far has been the year with the second-highest volatility since 1990, the highest volatility was seen in 2020.

“We are expecting much higher prices into year end,” and Energy Aspects’ call for oil prices at year-end is about $120 a barrel, she added. Early on Friday, Brent Crude was trading at $90 per barrel.

After the EU embargo enters into force, India and China in theory could absorb additional Russian oil, but the banking sector would be wary of secondary sanctions from the U.S. and this could cap Russia’s ability to export oil, Energy Aspects’ Sen said. In addition, Russia tying up a lot of oil on ships to Asia and then finding buyers would further raise freight rates, she added.



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