Europe’s now dealing with an oversupply of natural gas after hoarding it for months before winter

Good morning, Opening Bell readers. Phil Rosen here.

It's not because I'm vegan, but I haven't bought eggs in months now. Thanks to inflation, a dozen eggs now costs more than a pound of beef.

Prices are now 70% more than a year ago, but that's not the only part of breakfast under pressure — orange juice is hovering near record highs, too.

Luckily the bagels and tap water in New York are good.

Today, we're diving into the energy scene in Europe that not long ago many governments had thought would be in a state of catastrophe by now.

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1. Europe lucked out in a big way over the last three months. The winter was warm, nations averted an energy crisis, and now the year's worst threat of cold weather is nearly over.

But the problem now is that European nations hoarded so much natural gas in the run-up to winter that those stockpiles have depreciated in market value dramatically, as my colleague in Singapore Huileng Tan reports.

The benchmark price for natural gas futures has cratered about 28% this year, and it's trading roughly 85% cheaper than record highs reached in August.

At that time, natural gas was costing buyers about 10 times more than usual ahead of the winter months.

Recall that most of the volatility in energy markets in the last year can be traced back to Russia's invasion of Ukraine last February. As a key energy supplier to Europe, many feared that Russia would cut off natural gas flows in retaliation to Western sanctions.

Those concerns pushed European buyers to import as much natural gas from other countries as possible to backfill their storage facilities in preparation for cold weather.

Luckily, warmer temperatures won the season. Europe enjoyed its third hottest January ever last month, meaning people used less heating and thus less natural gas.

But according to a Bloomberg analysis of data from Gas Infrastructure Europe, regional natural-gas inventories are at their highest level in years.

That means that any sales from the stockpile on the spot market will come at a loss — and any losses at the government level could be shouldered by taxpayers.

"If buyers did not hedge the volumes they stored last summer, they will try to keep that gas in storage until prices potentially rise next winter or further in the future," Stefan Ulrich, an analyst with BloombergNEF, said in the report. "It seems unlikely that buyers will be able to recoup their buying costs in full unless the market dramatically tightens."

As for Russia, which until recent history was among the globe's key energy players, the country is now in a much diminished role.

A former Gazprom official told Reuters this week that all the years of work to build up Russia's natural gas exports have become moot.

In his words: "The work of hundreds of people, who for decades built the exporting system, now has been flushed down the toilet."

Do you think volatility will return to energy markets? Will energy prices soar again in 2023? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.

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Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com.

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) and Nathan Rennolds (@ncrennolds) in London.