Il gas price it is in free and constant fall, reaching values not seen since 2021, well before the war in Ukraine and the subsequent cut in Russian supplies. If until recently there seemed to be a perfect storm in the energy markets, it is time for some brightening with the normalization of prices. And the effects may soon be visible in too bill. Even the quotes of the Petroleum are veering downwards, thus helping to create a cautious optimism among operators. As a result, it deflates more quickly than expected.inflation which according to many “reached its peak” in the Eurozone.
After so much pessimism about the prospects of the global economy, there are glimmers of confidence. Number two of International Monetary Fund, Gopinath tour in a video published on the sidelines of the World Economic Forum in Davos, he said that inflation "still remains very high", but in major markets it appears to have "peaked" and the global economy is showing "signs of resilience" . To deviate from the chorus of pessimistic voices was also the EU commissioner, Paolo Gentiloni, who reiterated how the European Union could only discount a "limited contraction" in the first quarter of the year and avoid a deep recession. But if all these factors have contributed to creating a more favorable context, the ECB is keeping a firm grip on rates: "Determined to act".
With gas and oil prices falling and inflation letting go, in spite of some expectations of a "black" 2023, the specter of recession it's less scary. But why? Let's go in order.
Why is the price of gas nosediving?
Le quotations they fell by 11% to 57,6 euros per megawatt hour, reaching the levels of September 2021 and recording a decrease of 24% since the beginning of the year. The causes are many and he explains them in the sun 24 hours Davide Tabarelli, president of Nomina Energia. First, i consumption I got off thanks to temperatures above average and drop in demand of industry and power plants, largely switched to coal. Even if winter is just beginning, as the temperatures of these days confirm, the forecasts are "optimistic" and there are plans to return to milder temperatures, which is why gas prices are below 60 euro/MWh, 5 times less than the peaks at the end of August, but still far higher than the long-term averages of 20 euros prior to the crisis.
The lower consumption during the first weeks of winter leads to a greater filling of the storage. European deposits are much fuller than what usually happened in this same period in recent years, when the figure was normally between 60% and 65% (today around 70/80%).
Full storage, more LNG and a favorable climate
Furthermore, there is also the extensive interruption of addiction to reassure Russia and the availability of liquefied natural gas for Europe, with China which at the moment does not seem willing to compete.
Then there is the wind. The absurd price peaks in August (350 euro/MWh) were also due to the almost total absence of electricity production from wind in Northern Europe, the exact opposite of what has been happening in recent days, with an average production in Europe greater than 100 GW for the week ending 15 January. While in August it was at 35 GW and a year ago at 70 GW. Another chore of the past months, now less threatening, is the French nuclear, whose plants have returned to producing in large quantities, thanks to a sudden recovery which, however, does not let you sleep peacefully and which could always recur.
This is why, looking to the next season (autumn-winter 2023-24, but getting ready in the summer) the LNG import structures that have been built at full speed in Germany and the Netherlands become fundamental, 4 regasifiers, two each, with the last German sending the first gas. Indeed, the market did not react to a sudden interruption on the two new Dutchmen, which will last until January 30th, confirming the tranquility that dominates among operators.
Germany accelerates on regasification terminals. At what stage is Italy?
The decision of the European Commission to move on is also pressing down on gas prices common purchases. It will help avoid the rush to stock purchases of last summer, which in fact pushed prices to historic highs with an impact on inflation that we are still discounting (over 11%) and with a surge in bills. An error, this, also recognized by Germany, through the mouth of the German vice-chancellor and economy minister Robert Habeck, who emphasized the urgency of building another 4 regasification terminals, in addition to the two just completed, which will arrive within this year.
German speed highlights the Italy's delay on regasification terminals. The need to act quickly is also linked to the fact that much of the gas imported now comes from Africa and must be taken north, to the Po Valley, where it is needed. And for this we must accelerate on the regasification terminals. The "Piombino" one will be operational by May", Snam CEO Stefano Venier said in a conference call on Thursday 19 January, adding that "with the other new regasification terminal, planned for Ravenna, it will guarantee high flexibility for Italy while the liquid gas, will rise from 20% to 40%”.
Inflation: is the worst really over?
THEinflation Primary education has probably peaked, but some of the 'stickier components' such as the service sector are still on the rise in some countries. You said this speaking with Bloomberg TV on the sidelines of the work of the World Economic Forum in Davos Gopinath tour, first deputy managing director of the International Monetary Fund adding that 2023 will be a "difficult year" even if there are signs of resilience. The IMF's new forecasts for the global economy scheduled for the end of the month – added Gopinath – will not be very different from those published in October.
“After going through about three rounds of estimation reductions – he continued – at least this time we are not seeing a worse result. Although global growth will bottom out this year, then there will be a improvement towards the second half of this year and then in 2024″.
Even Confindustria seems less pessimistic about the future. “We will have a year characterized for the first six months by some difficulties. In the second half of the year the economy should recover strongly. However, we fear a slowdown in investments", said President Bonomi on Radio 24.
As far as the 'inflation, the number one industrialist estimates “inflation at around 5-6% by the end of the year, if there is no further increase in the price of gas”. “Ours is an inflation from imports due to the flare-up in the costs of raw materials, especially energy”. Through August “we will continue to discount the August 2022 peak,” he concluded.
Lagarde: "Recession contained" but the ECB will not lower rates
Although the economy in the Eurozone is doing better than expected, inflation remains at record levels and the ECB seems intent on pursuing the path of restrictive monetary policy to return to the 2% inflation target set by the Eurotower strategy.
Christine Lagarde's statements in Davos confirm this: the economy will probably only experience a "small contraction" in the eurozone but 2023 "won't be brilliant" and inflation "remains too high". Therefore, the ECB will stay on course on rates “until we have entered restrictive territory long enough to quickly bring inflation back to 2%. We don't see a de-anchoring of expectations, but we can't risk it,” concluded Lagarde.
