Europe Suddenly sitting on an abundance of natural gas, driving down prices and easing fears of winter fuel shortages and rationing as the continent ditches Russian energy.
Just a few months ago, officials, executives, and analysts worried that with Europe turning away from Russian gas in the wake of Moscow’s invasion of Ukraine — and with Russia stifling exports in response to sanctions — The continent will not have enough fuel for the winter.
They urged consumers and businesses to conserve fuel, warned of mandatory rationing if they did not do so, and purchased massive amounts of shipped gas from places like the United States and Qatar.
These measures – along with a recent wave of unusually warm weather – have led to massive supplies of gas in storage on shore and in tankers afloat off the coast.
“The supply is good,” said Roland Harrings, CEO of Aurubis AG, Europe’s largest copper producer and major energy user. “We didn’t make it. I’m not saying it’s over now. But it looks a lot better than it did two months ago.”
Dozens of LNG tankers are floating at sea in European ports. While storage space and berths capable of receiving supercooled goods are not available, some merchants keep it Gas on board in the hope of lower prices They get better before they are unloaded, confirming the dramatic shift in the markets.
Benchmark gas futures in the wholesale market have fallen by more than a tenth this week to €100, roughly in dollars, megawatt-hours. This extended last week’s decline and reversed the recent decline in the US, which is also weather related.
The comfortable situation in which Europe finds itself may be temporary. Starting next week, seasonal forecasts will be able to show some accuracy in how winter weather affects storage. Cold, dry, windy winters can suck up gas stores and hinder wind power generation. Mild, wet and windy winters can help choke off gas demand and boost wind power.
Meanwhile, a cold snap in Asia may prompt traders to shift gas from offshore Europe to China, Japan or South Korea.
Another risk: the gas infrastructure sometimes breaks down or needs to be repaired, which could cut off some of the surplus in Europe or make it more difficult for users to reach. Sabotage is also a risk after Western investigators ruled that recent explosions along the Nord Stream gas pipelines connecting Russia and Europe were intentional.
However, European prices have fallen more than 70% from all-time highs in late August. It has fallen to levels last seen in June, when Russia cut off supplies in what European governments have called a parallel economic war with the invasion of Ukraine. Moscow says it is a reliable supplier and blames sanctions for the outage.
Today’s mild weather is delaying the date when Europe sinks into full gas storage to heat homes and offices. The temperature will reach 23 degrees Celsius, or 73.4 Fahrenheit, in Paris Thursday, according to the UK Met Office. That’s seven degrees Celsius above the average daily peak in October and closer to August temperatures than typical fall conditions.
And the massive effort to focus on Russian gas supplies has put the continent in a stronger position than feared when Moscow first cut exports. The European Union and national governments have made it mandatory to stockpile gas in storage while urging companies and consumers to reduce demand. Caves and tanks across the EU are 94% full.
Government and corporate officials greeted with relief the lower prices. Analysts say it is now unlikely that gas levels in Europe will fall seriously unless the winter is exceptionally cold or pipelines from non-Russian suppliers are severely damaged.
The drop in prices reflects, to some extent, the limitations of Europe’s gas infrastructure. If Europe has more storage space or more terminals that can convert supercooled gas delivered in LNG tankers back into gas, traders can continue to bid for winter gas storage. But with stores nearing filling, finding a place for household gas has become a challenge.
So traders sell contracts that expire soon to avoid delivery, lowering their prices. Gas prices for same-day deliveries briefly fell into negative territory this week in the Netherlands – echoing US crude’s slump below $0 a barrel in The start of COVID-19.
Meanwhile, tankers are piling up off the coast of Spain and in the English Channel, waiting to unload as the continent plunges into storage and the suffocation disappears. Some traders send gas to the east via pipelines to Ukraine, which has a buffer stock.
Futures markets are pointing to higher prices in December, as cold weather is expected to increase demand and stores will start to dwindle. Governments, regulators and electricity and gas network operators, including Germany, have prepared plans to protect the most vulnerable energy users during the winter in the event of low stocks, for example, by enforcing blackouts and cutting off non-priority industries.
Traders and government officials expect next year to be even more difficult. Gas contracts to be delivered until 2023 are trading well above the current price due to the challenge that Europe will face in refilling Russian gas storage with little or no volume. Russia still sends a small amount of gas to Europe via Ukraine and Turkey and a small amount of LNG shipments.
“Europe has enough gas reserves to survive this winter unless the weather is very cold,” Nicholin Brumander, an analyst at Rystad Energy, said in a note. “But the continent is not out of the woods yet: as Russian flows continue to decline, the winter of 2023 will be even more difficult.”
Even after the downturn, prices in Europe are more than seven times higher than they were two years ago, before the market begins to rise in 2021. High gas prices have inflicted heavy losses on European industry and prompted governments to commit hundreds of billions of dollars. From the euro to protect businesses and consumers during the winter.
Data published by S&P Global this week showed that German factories made the biggest production cuts since the start of the pandemic this month, raising fears of a recession.
The European Union is taking its next steps to boost supplies to and from Russia Suppression of volatility in energy markets. The bloc’s executive body this month proposed caps on gas prices in the event of barbed wire moves and pushed companies to join bids for gas from outside suppliers. Energy ministers from member states are scheduled to meet on November 24 with the aim of adopting the package.
“The good news is that the price of gas is coming down,” Luxembourg’s Energy Minister Claude Tormes said on Tuesday.
Kim McCrell contributed to this article.