Page 4 - FSUOGM Week 02 2023

FSUOGM COMMENTARY FSUOGM

Russia has lost the energy war

Natural gas prices have slided to a pre-war low, despite drastic cuts in

Russian pipeline supply.

RUSSIA
RUSSIA has been waging a war on only in the Prices remain much higher than in typical years,
WHAT: conventional sense but also in the energy sector. and this will have major and lasting effects on the
Russia has significantly Since Moscow launched its invasion of Ukraine European economy, but it seems clear that Mos-
cut gas supply to Europe in February last year, Russia's state-owned gas cow's plan to bring Europe to heel this winter has
over the past year. exporter Gazprom has steadily been squeezing ultimately failed.
Europe of its gas supply, in order to drive up
WHY: energy prices, damage key European industries Weather as an ally
There has been and trigger public unrest. This has all been in an European gas prices slumped to their lowest
significant demand attempt to force the EU to make concessions in level in the first week fo the year snce before
destruction, but Europe the Ukrainian conflict and potentially get Euro- Russia launched its invasion of Ukraine. The
has also been supported pean government to push Kyiv to accept a peace front-month TTF contract closed at €65 per
by ample LNG supply. deal that might allow Russia to keep control MWh ($739 per 1,000 cubic metres) on January
of the territories it has captured and formally 4, representing the lowest level since mid-Janu-
WHAT NEXT: annexed over the past year. ary last year. The UK NBP contract has seen a
The outlook moving However, Europe for the most part still similar descent.
forward will depend remains staunch in its support for Ukraine's Prices have rallied since then on the back of a
greatly on the weather. integrity, and ample supplies of military hard- cold snap, but with Europe continuing to enjoy
ware from Europe to Kyiv's forces continue. ample LNG supply and record volumes of gas
This is because Europe has been saved from a in storage for the time of year – 83% of capacity
far worse fate this winter by unseasonably mild as of January 7 – it is very probably Europe will
weather, driving down demand for heating. make it through the rest of winter with enough

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