There is now so much natural gas in Europe that prices have dropped below zero.


London
CNN Business

Europe has more gas than it knows what to do with. So much in fact that spot prices briefly went negative earlier this week.

Authorities warned of an energy crisis this winter as Russia, once the region’s largest supplier of natural gas, cut off supplies in retaliation for European sanctions over its invasion of Ukraine.

Now, EU gas storage facilities Close to full, tankers carrying liquefied natural gas (LNG) line up at ports, cannot unload their cargo, and prices drop.

The price of European natural gas futures is down 20% since last Thursday and has dropped more than 70% since hitting a record high at the end of August. Dutch gas spot prices fell below €0 for an hour’s delivery on Monday, reflecting real-time European market conditions, according to data from the Intercontinental Exchange.

Prices turned negative “The grid is oversupplied,” Tomas Marzec-Manser, head of gas analytics at Independent Commodity Intelligence Services (ICIS), told CNN Business.

For Europe, where homes and businesses are swarming with spectacular rises in prices, this is a staggering turn of events. one of the most important energy sources in the last year.

Massimo Di Odoardo, Wood Mackenzie’s vice president of gas and LNG research, says the dramatic change in wealth is largely due to unseasonably mild weather.

“We’re seeing temperatures in countries like Italy, Spain, France, and [gas] Consumption near August and early September [levels]”Even in countries in the Scandinavian countries, the UK and Germany, consumption is well below average for this time of year,” he added to CNN Business.

The European Union has also filled gas storage facilities close to capacity, creating significant buffers against further supply disruptions. According to data from Gas Infrastructure Europe, stores are currently almost 94% full. This much Well over 80%, the target that the bloc countries will reach by November.

“This is an extremely high level,” Di Odoardo said, noting that the maximum storage level has been 87% of the average capacity over the past five years.

Europe’s efforts to provide as much fuel as possible before winter has resulted in a backlog of LNG tankers, which is exacerbated by the shortage of LNG import terminals at European ports.

The bloc increased LNG imports from the US and Qatar as natural gas imports from Russia fell.

Felix Booth, head of LNG at data firm Vortexa, told CNN Business that due to a lack of storage options, as many as 35 ships are either floating near ports in northwest Europe and the Iberian peninsula or moving very slowly towards them.

It will probably take another month for these ships to “home the cargo,” he said.

Together, they carry about $2 billion worth of LNG, according to Kpler, citing energy market data provider Argus Media.

Despite the recent decline, €100 per megawatt hour ($100) European gas futures are still 126% above where they were last October when economies started to reopen from the pandemic lockdown and demand surged.

Booth said that as the weather cools, prices could rise sharply again in December and January, encouraging some of these tankers to wait a little longer at sea before arriving at the port to unload.

Despite Russia’s share of Europe’s total gas imports falling from 40% to just 9%, the region may be in a difficult situation next summer as it tries to renew its stores before the next winter.

Bill Weatherburn, a commodity economist at Capital Economics, said prices are expected to reach €150 ($150) per megawatt hour by the end of 2023.

“Topping up tanks before next winter will require the EU to import even more LNG, because there is a need to replenish Russia’s natural gas imports lost for a year,” he told CNN Business.

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