Europe has managed to survive the most acute phase of the energy crisis, but the future is still very uncertain.

• For approximately 500 days (in 2021–2023), Europe was gripped by an unprecedented energy crisis that was characterised by record-high prices—especially for natural gas.
• Supply issues induced by the changing geopolitical landscape have been the central cause of the crisis.
• After reaching an extraordinarily high level of €311 per MWh in the summer of 2022, natural gas prices have dropped by more than 80% by winter 2023, but they still remain more than two times higher than their long-term historical average.
• Europe has managed to withstand the most acute phase of the crisis but at a rather large cost.
• Overall, Europe has adapted and managed to accumulate substantial natural gas inventories, but the situation remains fragile and prices volatile.
• Although the probability of an energy crisis returning this winter is relatively low, such possibility still remains.

KUALA LUMPUR, MALAYSIA -Media OutReach Newswire -20 December 2023 - While there are many aspects of the energy crisis in Europe within several markets, including crude oil, coal, electricity, and emission allowances, as well as within several domains, such as EU energy policies and regulation, diplomacy and international relations, this article will focus exclusively on the natural gas market, because it is here where the energy crisis has been most pronounced. Europe faced an unprecedented energy crisis for around seventeen months (from September 2021 to February 2023), as coal, natural gas, and electricity prices surged to all-time highs. Governments across the continent rushed in to introduce energy-saving measures and implement conservation policies, while households and businesses had to cut consumption rapidly. Moreover, the conflict in Ukraine has disrupted energy supplies as the European Union (EU) has prohibited the maritime transport of Russian crude oil and has set a target for the bloc to phase out imports from Russia by 2027. Furthermore, three of the four lines of the Nord Stream pipeline were damaged by unknown explosions, limiting Europe's supply options. Either way, importing cheap pipeline gas from Russia no longer seems like a viable option for Europe as relations between the two actors remain strained. Now, as 2023 draws to a close, can we confidently conclude that the energy crisis in Europe is over? How prepared is Europe to cope with the upcoming winter? What are the risks and challenges that lie ahead? History Kar Yong Ang, Octa analyst, has succinctly summarised the context: ‘Europe's energy crisis was long in the making. As the global economy recovered from the recession caused by COVID-19, the demand for LNG [liquified natural gas] surged in the summer of 2021. However, the supply could not immediately cope with the rising demand, so prices across the globe went up. Higher prices, coupled with LNG supply constraints and sluggish European production, prevented the European states from restocking natural gas to adequate levels before the winter. Another shock came in December 2021, when gas flows from Russia along the Yamal Europe route dropped sharply—ostensibly due to maintenance. Then, as you know, the armed conflict in Ukraine broke out, taking the whole continent to a totally different reality and sending energy costs to the stratosphere.’ The energy crisis's most acute phase occurred in the summer of 2022. One only needs to look at the evolution of Europe's benchmark natural gas price (TTF) to assess the scale of the emergency (see the chart above). On 25 August 2022, TTF price reached €311 per megawatt-hour (MWh), the highest level ever recorded. On that specific day, the price was 44% above the previous maximum reached on March 7, 2022, and was a staggering 18 times higher than the three-year average price recorded over 2019-2021. Despite Europe's gas storage sites being 78% full in August 2022, supply worries were rife as imports from Russia dropped by around 60%, forcing Europe to rely extensively on liquefied natural gas (LNG) imports—especially from the United States. However, the aggregate supply of LNG in the global market at that time was reduced as one of the U.S. LNG export plants—Freeport LNG—had to go offline due to an explosion incident. Thus, to secure an adequate number of LNG cargoes, Europe had to outbid other customers in South and East Asia by agreeing to pay higher prices to suppliers. A lot has changed since last summer. Europe has adopted and managed to reduce demand, find new suppliers and build natural gas stocks to comfortable levels. The European gas prices have returned to normality but remain above the level observed before the crisis. On Monday, 6 December, the front-month futures contract for delivery in January at TTF settled at €39.25 per MWh, 87% below the...