WINTER GAS SUPPLIES TO EUROPE AT RISK

EU countries could face disruptions in gas supplies in the winter months, due to the volatility of global energy markets and a further decline in Russian gas imports.

According to the publication, “one of the main problems is that the European gas market is now more than ever tied to the volatility of global energy markets, following its reorientation from Russian gas to Liquefied Natural Gas (LNG)”.

“Gas storage facilities in Europe are now full <...> but a few disruptions in supply are enough for everything to go wrong,” the FT quoted a trader as saying. The situation is significantly complicated by the possible cessation of gas supplies via pipelines to Europe via Ukraine when the Russian fuel transit agreement expires at the end of 2024, the publication notes.

“If a severe cold suddenly arrived in the EU and at the same time Russian gas stopped flowing, the price of this fuel would increase,” said Rabobank analyst Florence Schmit. And it is unlikely, he said, to expect “any significant alternative supply through other pipelines.” Most “will probably have to be replaced with LNG,” he added.

At the same time, due to delays in the launch of new export facilities, growth in LNG supplies to Europe this winter will remain limited, according to Kpler estimates. In the coming winter months, supplies to the European LNG market will increase by only 2.5 million tonnes, or four times less than growth in 2023, Kpler forecasts. There are also concerns about the impact of tensions in the Middle East. If further escalation in the region leads to the closure of the Strait of Hormuz, this would jeopardize 20% of global LNG supplies, the publication says.

The International Energy Agency warned in its latest report on global gas markets that the global gas balance “remains fragile as limited growth in LNG production constrains supply” and that “markets remain sensitive to unexpected shifts in supply or demand,” the FT recalls.