Gas crisis: despite appearances, Europe is not out of the woods


Gas crisis: despite appearances, Europe is not out of the woods
Written by madishthestylebar

EU storage levels top 90% after a major push to offset the end of Russian gas.


After months of tension and anxiety in anticipation of winter, gas prices are falling and ports are congested with LNG carriers. But Europe is not out of the woods yet, according to several analysts.

For more than a week, traffic jams of LNG carriers – these ships that transport liquefied natural gas (LNG) – have been clogging up Spanish ports, as if Europe could no longer absorb more gas. According to the operator of the Spanish gas network Enagas, this situation should continue “at least until the first week of November”.

The Dutch TTF, the European benchmark for natural gas, is currently trading close to its lowest level since June.

It even fell temporarily below 100 euros per megawatt hour at the end of October.

Price down 60%

Its price has fallen by more than 60% since its surge in August, after the interruptions of Russian deliveries via the Nord Stream gas pipelines which had panicked the markets. The TTF’s contract for immediate delivery even briefly fell into negative territory last week, a first since October 2019.

Same observation in the United States, where gas prices have collapsed.

These developments contrast with the stratospheric surge in gas, reaching close to 350 euros per MWh in Europe in March, after the start of the Russian invasion of Ukraine in February.

Since then, Europe has struggled to fill its reserves to reduce its dependence on Russia as much as possible, running behind alternative sources, calling crisis meetings and calling for energy sobriety. The strategy paid off,

EU storage levels now exceed 90%.

“Since the first quarter of 2022, the European Union has benefited from

a very strong influx of LNG mainly from the United States

“, explain the brokers of Marex.

“Premature to declare victory”

If Georgi Slavov, of Marex, affirms that Europe is indeed at a stage of excess supply of gas compared to demand, “it is premature to declare victory”, he warns however.

The current lull is the result of several favorable factors. Abnormally high temperatures for the season reduce heating needs, and therefore gas.

“The economic slowdown” and “the restrictions imposed on gas consumption” go in the same direction, argues the analyst, questioned by the



A cold winter and an industrial recovery at full capacity

could therefore quickly turn the tide.

“The continent is not out of the woods,” added Nikoline Bromander, analyst for Rystad Energy. “With Russian flows continuing to decline,

winter 2023 will be even more difficult”.

The price of European natural gas is still moving at a very high level, up more than 80% since the start of the year.

“The price curve is not going to settle in negative territory”

assures AFP Eli Rubin, of EBW Analytics Group.

No imbalance between supply and demand

In gas, “we are talking about short-term imbalances between supply and demand which have an effect on short-term prices”, insists Eli Rubin, especially concerning immediate delivery. The same thing in Spain, where

tanker plugs come from a “bottleneck”, but not from a fundamental imbalance between a supply that has become too abundant in relation to demand.

This phenomenon takes place “every year” at the approach of winter, confirms Vincent Demoury, general delegate of GIGNL (International Group of Liquefied Natural Gas Importers), and remains localized off the coast of Spain.

The country has six LNG ports, more than any other European country, where 108 ships are welcomed each week. Spain also has 44% of the European Union’s total storage capacity, according to Enagas.

According to Vincent Demoury, the fall in gas consumption and the high stocks for the winter mean that there are no longer “slots available in Europe in November” to unload ships. LNG carriers are thus transformed into temporary floating storage “waiting for consumers to need gas and for prices to be more attractive”.


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