Europe is entering the winter season with record-low gas storage levels for this time of year, meaning it will have to compete more actively with Asian countries for liquefied natural gas supplies in the coming months. In the event of a cold winter, this competition could lead to another price spike, the Financial Times reports, writes UNN.
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Gas reserves in EU storage facilities currently stand at around 67% of their capacity—the lowest level for this time of year. By comparison, the European target calls for storage facilities to be filled to approximately 80% by December.
The situation is being exacerbated by disruptions to LNG supplies from the Middle East. Due to transportation problems through the Strait of Hormuz, the global market has received tens of millions of tonnes less liquefied gas from Qatar and the UAE this year.
Europe will have to compete for American gas
According to market participants’ estimates, in the event of a cold winter, simultaneous growth in demand in Europe and Asia could trigger a scramble for available LNG cargoes, primarily from the United States.
Asian spot prices for liquefied gas have already nearly tripled this year compared with pre-war levels and approached $30 per million British thermal units. Experts warn that under an unfavorable scenario, they could rise to approximately $40 in winter.
Europe is particularly vulnerable because of the small amount of spare gas available on the global market. If winter is cold in both Europe and Asia at the same time, buyers from both regions will be forced to raise their bids for the same American LNG cargoes.
At the same time, a warm winter could significantly ease pressure on the market. However, even under such a scenario, analysts expect gas prices to remain elevated due to low storage levels and supply problems from the Middle East.