The European gas market continues to tighten

The European gas market continues to tighten

The scramble for goods has prompted utilities to restock

Europe's vast gas network has been unable to avoid a supply crunch this winter.

The flow of gas into European pipelines fell to its lowest level in three years in July was even worse in August. Only one cargo of LNG is scheduled to arrive in the UK this month, while Spanish gas traders will export six cargoes to get higher prices in Asia.

I hope it's too cold this winter

All this comes as Russian gas shipments to Europe have fallen. Europe is known to get more gas Russia than the continent's major producers.

If a cold snap hits this winter, continental Europe is expected to have a very difficult winter. Gas inventories are already at their lowest level in more than a decade, European gas prices have been repeatedly broken the market is nervous about new supplies. Much of the additional supply is expected to come through the unfinished Nord Stream 2 pipeline linking Russia Germany.

After a fire at Gazprom's PJSC facility in early August, Russian gas flows to Europe through Ukraine, an important transit pipeline, were reduced, while gas flows to Germany through the Yamal-Europe pipeline through Belarus Poland were affected. The Russian gas giant said in recent days that it was "overwhelmed" by record demand abroad in Russia needed to replenish its gas storage sites beyond normal levels.

"Europe needs to restock, but given the current scramble for cargo, unless pipeline flows increase, the market will be very tight," said FlexLNG CEO Alexander Kaleklev. There's a lot of uncertainty in winter, depending on the temperature."

October is expected to give all parties a "breather"

Gas production in Europe is declining, the Groningen field in the Netherlands is likely to close three years early, the continent is increasingly dependent on the vagaries of the global gas market. But Asian gas markets are also tight, meaning countries such as Japan South Korea are willing to pay more for gas, which has even attracted Spanish gas traders. Asia's demand for LIQUEFIED natural gas (LNG) will remain strong for the rest of the year, Novatek's deputy CHIEF executive said on an earnings call.

It's just that demand is increasing in Europe. Norway's gas supply has been disrupted this year liquefied natural gas production has faced challenges as a rebound in the pandemic has caused major maintenance delays. In addition, Europe's oil gas majors have a number of overseas gas terminals that are effective. Royal Dutch Shell chief Financial Officer Jessica Uhl said the supply disruption was a long-term structural problem would be resolved.

Bloomberg New Energy Finance forecasts a rebound in European imports in the fourth quarter thanks to increased supplies the US, Oman Australia. Morgan Stanley expects European gas prices to fall as more LNG arrives on the continent. Ronal Smith, senior oil gas analyst at BCS, said: "With Asian demand peaking in the summer expected to start falling in the autumn, Europe is likely to attract some spot LNG, which could give Europe a 'breather' in October. If the temperature does cool in October, we can continue to inject gas at the storage sites." It may be too late for European utilities to restock before the severe winter weather sets in.

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Source: International Gas Network