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: European gas futures up as Deutsche Bank analyst says supplies to remain tight for years

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European natural gas benchmark prices rose 6% on Thursday, one day after EU policymakers unveiled a plan to clampdown on profits by energy companies in effort to soften the blow on consumer energy bills.

Despite EU policymakers launching an “emergency market intervention” on Wednesday, Dutch TTF gas futures – the European benchmark – was up 6% to €231 per megawatt hour on Thursday. UK natural gas futures
GWMV22,
+3.02%

for October were up as much as 13% to highs of £460 per megawatt hour.

What the EC did announce was a three-step plan, comprising a windfall tax to scrape $140 billion from the profits made by energy companies, mandatory electricity savings and a cap on revenue from electricity producers at €180 per megawatt hour.

In her annual State of the Union speech, von der Leyen said consumers should “reap the benefits” of low-cost renewables.

She also announced a new gas market benchmark will be created to reflect the EU’s rapid shift from pipeline gas to liquified natural gas (LNG).

European gas supplies have been choked since as early as October last year, when gas flows from Russia began to drop to just gas deliveries under long-term contracts, according to James Brand, head of European utilities at Deutsche Bank.

During a webinar with Alphasense on Wednesday, Brand said gas supplies are going to remain “tight for a few years to come”.

“Even by 2026, the gas price will be three times what it was pre-crisis,” he said.

Germany and Italy in particular are looking at “tight” winters and years ahead, Brand added, due to their reliance on Russian pipeline gas from Nord Stream 1, which has been shut off since the end of August.

EU countries have been rushing to fill their gas storage capacity, since supplies have dwindled.

“It’s not just as simple as filling the storage levels, because winter demand is so much higher than average demand. You need storage even in an ordinary year to meet winter demand.

“Even if you had your storage levels 100% full in Germany, it would only be equivalent to two winter months, with quite high run rates through the remaining months. So it’s not just about storage, it’s also about supplies and demand,” he said.

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