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FX.co ★ Europe may get into trouble due to severe winter

Europe may get into trouble due to severe winter

Europe may get into trouble due to severe winter

According to analysts, the upcoming winter in Europe will be severe as Moscow postponed restarting the flow of natural gas. Notably, all enterprises are fully operational. Nevertheless, the EU economy may see some difficulties in the following year, analysts say. The fact is that Europe could hardly reduce its dependence on Russian gas without a massive suspension of production. The region will still endure considerable hardship despite almost full gas storage facilities. Preliminary estimates unveiled that European countries should keep the Russian gas supplies at the current levels to satisfy demand by the end of this year. They also may reduce gas usage by 7-12 billion cubic meters. However, this will become possible only in case of a complete shutdown of several industries. By the moment, Europe has already stopped 70% of its nitrogen fertilizer production capacity. Meanwhile, production of aluminum has dropped by 25%, whereas steel production has declined by 5%. Although the EU countries are trying to reduce gas usage, they will still suffer its shortage during the heating season of 2022-2023. The situation is inevitable even in the case of a rather warm winter. Notably, gas delivery from other countries, the US in particular, is still under question. Developers of American shale fields are unable to increase gas supplies to Europe urgently. The EU countries have done a lot to diversify their gas supply for next winter. By September 2022, the EU had filled 85% of the total underground gas storage capacity thanks to bigger supplies from other regions. A decline in gas consumption, primarily in the industrial sector, also contributed to a rise in gas reserves. Notably, EU gas imports surged by 30% compared to 2021. Nevertheless, politicians fear that the region will have to cope with numerous problems caused by the gas deficit. According to initial estimates, the deficit may surge to 20-30 billion cubic meters. In this light, European countries will have to reduce gas usage or increase purchases of gas from Russia.

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