According to data released by Gas Infrastructure Europe, the European Union has hit their gas storage target 2 ½ months ahead of schedule by posting a 90.1% capacity as of August 16th, 2023. However, be warned, according to expert’s prices will probably remain volatile over concerns regarding the depth of the winter.
The EU set the benchmark or threshold for gas storage for November 1st, 2023, as they try to loosen reliance on Russian gas to see them through the coldest parts of the winter. However, this is the first time since records began (2016), that storage targets have attained this level at this time of year.
The European gas benchmark TTF Futures, (Title Transfer Facility) fell by 2.5% on 18th August, but still remains high because as experts advised, full inventories during the summer may not compensate for very cold weather in the winter.
Sadly, the European Union’s demand for gas cannot be met by storage alone, and in the event of colder temperatures, as well as global supply disruptions, Europe could once again be left looking everywhere for gas as they did in 2022.
Experts suggest that the EU will have to compete for liquefied natural gas (LNG), despite current storage levels. Indeed, since the Russian/Ukraine war, and with Russia cutting supplies, the EU have had to purchase supplies from the market to make up the shortfall and this can make them vulnerable to shocks in the global energy market.
A recent example is potential strikes at LNG export sites in Australia, which together account for circa 10% of global supplies. The market reacted accordingly with the TTF exploding upwards by 40% in the week ending August 12th, 2023.
Whilst exports of LNG are basically confined to Asian markets, if there was a decline, Asian buyers would have to search elsewhere to make up the shortfall, pitching them directly into competition with the European Union.
If, as some sources suggest, the winter 2023/2024 will be colder than the previous winter, LNG prices may well increase along with that of demand. As the Russian/Ukraine war shows no sign of abating, we can only hope for a milder winter than that which some forecasters have predicted.