Russia has suffered a major humiliation as experts now predict that wholesale gas prices will fall in Europe. Pierre Andurand, one of the world’s top-performing traders in the energy sector has now closed out his positions in natural gas markets, firmly believing that the skyrocketing prices of 2022 will not be repeated this year. In late 2021, wholesale gas prices in Europe surged following an economic boom as countries reopened after the pandemic. These prices then went through the roof in the months after, as Russian President Vladimir Putin began squeezing natural gas supplies in the buildup to his invasion of Ukraine.
At the start of Russia’s invasion of Ukraine last February, the European Union was heavily dependent on Moscow for natural gas exports, with the country providing around 45 percent of the EU’s total gas imports in 2021.
However, this dependence has rapidly decreased since then, as Moscow began limiting supplies to put pressure on the bloc, while the EU gradually increased sanctions on Russia.
As a result, Mr Andurand believes that the Russian leader has “lost the energy war”, adding that the worst of the European gas and power crisis has passed.
Over the past three years, the trader’s energy-focused hedge funds have enjoyed bumper profits thanks to the high energy prices, but he now he has closed out all his positions in natural gas markets, according to the Financial Times.
He noted that since Europe had rapidly adapted to living without a steady Russian gas supply, he believes that the price spikes from last year are unlikely to happen again.
In August, European benchmark price soared to over €300 a megawatt hour, as the Kremlin cut supplies rapidly following the EU’s support for Ukraine, resulting in prices more than 10 times their normal levels.
However, since then prices have significantly plummeted, reaching around €50/MWh. While this figure is still historically high, the major drop comes as a breath of relief for European countries grappling with a cost of living crisis.
Mr Andurand told the FT: “I think Putin lost the energy war. Very high natural gas and power prices in Europe were extremely bad for the world economy but now they have come back to a more reasonable level.
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“If gas prices stay here there will be much less worry about inflation and interest rates rises. There’s no more fear of an energy crisis. Now that Europe is getting used to living without Russian gas why would they ever go back?”
Andurand Capital, his company, that manages $1.4billion (£1.16billion) in assets, saw a staggering 650 percent gain in his Commodities Discretionary Enhanced fund from the start of 2020 until the end of last year.
The former Goldman Sachs and Vitol energy trader have become renowned in the energy industry for making bold and accurate predictions over the past two decades, including predicting that oil prices would turn negative during the pandemic.
He noted that although Putin had succeeded in putting pressure on Europe by temporarily driving up energy prices, he made a fatal mistake in underestimating buyers’ ability to adapt.
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He said: “I think it was a massive miscalculation over who had the leverage by Putin, in the same way he miscalculated how Ukraine would fight back and the west would be united.
“Russia has lost its biggest customer forever, and it will take at least a decade to bring enough pipelines [to redirect those gas sales] to Asia. Once Russia can only sell gas to China, Beijing will be in a position to decide the price.”
However, Europe is not out of the energy crisis yet, as European factories and households may have to ration energy again to prepare for next winter as it scrambles to adapt to plummeting Russian supplies, warned the boss of one of Europe’s biggest energy suppliers.
Anders Opedal, chief executive of Norway’s oil and gas producer Equinor, has warned that there needs to be a “further reduction in demand” to help refill gas storage sites ahead of next winter too. It comes after an earlier agreement to conserve energy was struck by EU leaders.