BAKU, Azerbaijan, September 27. Current market expectations suggest that oil will continue trading below the August 2023 price, yet remain above the average levels observed from 2017 to 2021, Trend reports.
As the European Bank for Reconstruction and Development (EBRD) notes in its outlook, this situation arises from a combination of factors, including a less robust outlook for China and a more extended timeline for monetary policy tightening in the US. Additionally, supply constraints have been imposed by OPEC+ member countries.
These price levels remain nearly four times higher than the cost of gas in the US, although significantly lower than the peak multiple of 11 previously seen. Nonetheless, they surpass the average gap in gas prices between Europe and the US during the period from 2017 to 2021.
Meanwhile, as the Bank noted, gas prices in Europe increased sharply in late 2022, having eased since, to levels seen in early 2021.
At the same time, with pipeline gas supplies from Russia to Europe experiencing a year-on-year decline of over 70 percent in the latter half of 2022 and energy prices surging, gas consumption in Europe dropped by more than 20 percent during the winter of 2022-23 when compared to the previous winter. Surprisingly, this reduction had a less severe impact on overall economic activity than anticipated, likely due to milder conditions.
The EBRD notes that the gas futures markets indicate an anticipated rise in gas prices in Europe during the heating season. Interestingly, this projection comes even though gas storage in Europe stood at more than 90 percent capacity in August 2023, surpassing the five-year August average of 78 percent.