By Tsvetana Paraskova Global natural gas prices are set for another year of volatility, following 18 months of swings from record lows to record highs. As natural gas demand started to rebound this summer amid depleted stocks in Asia and Europe following a long and cold winter, prices skyrocketed in the autumn to record highs. This forced gas-intensive industries in Europe, such as steelmaking, fertilizer, and ammonia production, to curtail operations to reduce exposure to record-high input costs. While U.S. natural gas prices at the Henry Hub have plummeted in recent days due to forecasts of warmer winter weather, sinking below $4 per million British thermal units (MMBtu) early on Monday, prices in Europe and Asia are high and will depend on the winter conditions in those parts, and on Russia’s Gazprom in Europe. Europe is going into the winter with gas inventories at the lowest level in nearly a decade, while some cold spells in recent weeks have already boosted demand for heating and power generation, leading to higher prices at the European and UK wholesale gas hubs. Gas storage sites in Europe are currently at 70 percent full, compared to 85 percent on average for the past 10 years. At the same time, additional natural gas flows from Russia have not materialized yet, while Nord Stream 2 is at least a few months away from commercial operations and is unlikely to help Europe’s gas storage levels this winter season. In Asia, demand has rebounded strongly this year, sending spot liquefied natural gas (LNG) prices to record highs a few weeks ago. Last week, spot LNG prices for January delivery dropped by $1.50 on the week to $34.60/MMBtu, trade sources told Reuters. Despite the drop, the price is still as high as the record from the last winter season set in January 2021. Asia’s LNG demand has been growing by a whopping 21 Mt this year—a strong rebound from last year’s pandemic-driven impact, Gavin Thompson, Vice Chairman, Energy—Asia Pacific, at Wood Mackenzie, wrote last week. LNG suppliers are confident that gas demand in Asia will continue to rise in the coming years and decades and will underpin the development of more projects this decade. The latest LNG project to get the go-ahead was Woodside’s US$12-billion Scarborough and Pluto Train 2 developments sanctioned at the end of November. This winter, if it’s colder than usual in Asia, could send spot LNG prices higher still, although high import costs could sideline some more price-sensitive buyers. In Europe, natural gas prices will continue to be volatile—and will depend on the weather and on Russia’s gas flows via pipelines to Europe. Traders are watching closely every tender in which Gazprom is set to book pipeline capacity via the main pipeline routes to Germany and Poland. Every time Russia doesn’t book too much additional capacity, Europe’s benchmark gas prices jump. The market is also closely following the daily natural gas flows on the Yamal-Europe pipeline. In November, for example, Russian gas supply to Europe was volatile, as gas flows on the Yamal-Europe pipeline via Belarus to Poland and Germany were low or non-existent on some days, and at times reversed to flow eastward from Poland. The uncertainty over how much additional volumes Gazprom would ship on top of its contractual obligations has kept European benchmark gas prices volatile over the past month. The controversial Nord Stream 2 project is not out of the woods yet, as its certification is currently suspended by the Federal Network Agency of Germany, Bundesnetzagentur, until an operator of the pipeline in Germany is incorporated under German law. With tight natural gas supply and uncertainty whether and when Russian gas flows could be significantly raised, Europe’s power and gas systems and markets are facing the toughest test yet this winter season. If a colder 2021/2022 winter depletes gas in storage in Europe, again, next year could be another year of volatile natural gas prices in Europe and Asia, with possible new records in sight.