![Europe may have averted the energy crisis for now, but it](https://image.cnbcfm.com/api/v1/image/107244342-16846339711684633968-29543884571-1080pnbcnews.jpg?v=1684637612&w=750&h=422&vtcrop=y)
Europe could have done job of reducing its dependence on Russian oil and gas and easing the energy crisis attributable to the war in Ukraine, nevertheless it is “not out of the woods yet,” the top of the International Energy Agency (IEA) told CNBC. .
“Europe has been able to transform its energy markets, reduce its share of Russian gas to lower than 4%, and its economy continues to be out of recession,” IEA Executive Director Fatih Birol told CNBC’s Martin Soong on Sunday.
“Emissions in Europe have gone down… and gas storage is at a really decent level,” said Birol, speaking on the sidelines of the Group of Seven Summit in Hiroshima, Japan.
Russia has traditionally played a key role within the global energy complex, but Western countries’ dependence on that country’s energy has been severely curtailed as they proceed to unveil recent sanctions to punish Russia for its ongoing invasion of Ukraine.
“European countries did job … last winter,” said the top of the IEA, stressing that the region was successful in keeping the lights on and staving off the winter crisis, thanks partly to a milder-than-expected winter.
Nevertheless, Birol warned that the region’s energy market still has three primary hurdles to overcome this yr.
1. Growing demand from China
Global energy supplies were plentiful last yr as China was still on lockdown and buying less oil and gas due to slowing economic activity. Nevertheless, the identical can’t be said now and now This yr, Europe may face a tougher winter.
Demand for LNG (liquefied natural gas) from China is anticipated to pick up within the second half of the yr, Birol said, adding that the country’s gas imports are a “key determinant” of demand in natural gas markets.
But Birol believed there might be something positive – prices might be lower than predicted and he doesn’t expect a “big boom” of imports from China.
![The cap on the price of Russian oil](https://image.cnbcfm.com/api/v1/image/107240832-16841165721684116569-29456352346-1080pnbcnews.jpg?v=1684121776&w=750&h=422&vtcrop=y)
2. US debt default
The global participants of the energy market are also watching closely on stormy negotiations between the White House and Republicans over the US debt ceiling. And not using a deal, the US could face bankruptcy in early June, though that seems unlikely.
Negotiations were on hold while President Biden attended the G-7 summit in Japan, but he’s due to accomplish that return to Washington on Sunday. President he said at a summit press conference that he was “by no means” concerned concerning the negotiations and that “we’ll give you the chance to avoid insolvency and do something decent”.
Birol said a US default would cause oil demand and costs to drop, but agreed that such a scenario was unlikely.
“I’d avoid giving a precise number, but we will expect a big fall in the value of oil if we see such a default.”
“This problem in america shall be resolved and customary sense will prevail. And I do not see much of a risk to global oil markets. But in fact oil markets all the time involve risk. he added.
Oil prices rebounded on Friday after losses of greater than 1% the day gone by as investors became cautiously optimistic that the danger of a US debt default is easing as talks proceed.
3. There continues to be dependence on Russia
One other key challenge facing European energy markets is that their dependence on Russian gas has not been completely eliminated and provide prospects are uncertain.
Many countries within the region were forced into an energy crisis last yr when imports of Russian gas were severely curtailed.
Gas exports from the Russian state-owned energy giant Gazprom to Switzerland and the EU fell 55% in 2022, the corporate said in January. Birol noted that if there have been further reductions in gas imports “for political reasons”, Europe could again face “certain challenges” in the approaching winter.
Birol believed that the G-7 countries and European countries wouldn’t return to making any deals with Russia, adding that the history of Russian gas is “finished”. “It’s over,” he said.