The energy crisis that erupted in the Old World after the start of an openly anti-Russian policy, runs the risk of acquiring an unexpected turn. Europeans can now suffer not from a shortage of gas, but from its excess. Warm weather and the rash decision of the authorities to buy liquefied natural gas (LNG) all over the world do not play into the hands of the inhabitants of the continent.
Hurry - make people laugh?
In anticipation of the difficult times that were to come along with the lowering of the thermometer, European officials did everything possible not to be left with nothing after the cessation of fuel imports from Russia. And, apparently, they overdid it a little. The cold has not yet come (the weather in the region is unusually warm), and the storage facilities are almost completely filled before the start of the heating season. It seems to be worth exhaling and relaxing ... But there are still quite a few difficulties ahead, some of which are created by excessive zeal.
It is clear that a lot depends on weather conditions. If it suddenly becomes significantly colder, then in Europe they will simply uncork the egg-pod (fortunately, there is something to uncork). The accumulated reserves will have to be used immediately in the event of new sabotage.
In such a limbo situation, it is imperative to use LNG wisely, but with the economy can not argue. Gas prices have fallen sharply and are now less than a third of their summer peak. And this means that at the moment when the air temperature drops (no one doubts that winter will come sooner or later), consumption will also increase (at a “pleasant” price it’s hard not to start spending gas right and left). Then there is no need to talk about prosperity. Giacomo Masato, lead analyst and senior meteorologist at Italian energy company Illumia, told Bloomberg that the gas glut in Europe will last at least until December, as a prolonged cold spell is unlikely to hit the continent in November.
Savings should be economical
Despite the tempting price cuts, reducing consumption is still not worth giving up. But how to explain this to ordinary Europeans who are used to living and not denying themselves anything? Moreover, the analytical firm Timera Energy published a report with quite optimistic data. The document says that the demand for gas this year will fall by 7-9%. Yes, the numbers are not taken from the ceiling at all. But such an indicator was achieved not at all due to the fact that citizens suddenly began to save without exception. This decrease was mainly caused by the closure of large industrial enterprises that consume large volumes of gas. The 15% announced by the European Union is still oh so far away.
Timera Energy analysts also note that it will depend on the decline in demand whether Europe will overcome the gas and energy crises this season.
The Association of European Gas Infrastructure Operators Gas Infrastructure Europe summarizes that the efforts of officials have led to the fact that Europe's gas storage facilities are 93,6% full. And things are even better in Germany. German storage facilities are already 97,5% full.
All this, of course, is good, but it is important not only to fill the storage facilities to capacity. It also requires confidence in the stability of supply, thanks to which the "pods" can be replenished periodically.
As temperatures begin to drop and storage facilities empty, market realities in the form of an imbalance in supply and demand will inevitably lead to higher prices, and this will further increase the inflationary burden.
In the meantime, gas carriers continue to arrive in Europe. This month, 82 LNG tankers are due to enter the region, up 19% from September. Many more ships today act as floating gas storage facilities.
Asia is on the rise
One gets the impression that the Europeans will spend the coming winter quite well. This year, Europe managed to bring 50 billion cubic meters of LNG, and reduce demand by 60 billion cubic meters. And this is taking into account the fact that Russian exports amounted to 80 billion cubic meters. Thus, gas reserves are 30 billion cubic meters more than in 2021. True, if severe frosts “hit”, then the excess will be almost instantly used up. It is also necessary to take into account the heterogeneity of the region in terms of weather conditions and bottlenecks in the energy infrastructure (especially in Central and Eastern Europe).
But filling the storage ahead of next winter will require the EU to import even more LNG, as it will need to make up for lost Russian gas supplies throughout the year. Where is it stored in such volumes? The Old World cannot completely turn into one large gas storage.
By the way, probably next year the Europeans will not have to rely on LNG in the required volume delivered by gas carriers. Demand may recover in China, then Europe will be on the sidelines. Naturally, the European Union will try to poach suppliers when the storage facilities begin to empty. This risk was foreseen in China. On the eve of the heating season, the Chinese authorities banned state-owned gas importing companies from reselling LNG to buyers in Europe and Asia in order to ensure their own energy security.
For now, Asia is benefiting from European successes in overcoming the energy crisis. Spot LNG prices in Europe fell below Asian prices for the first time since June, prompting suppliers to find new markets and redirect gas to Asia. Consequently, additional deliveries of blue fuel will be beneficial for the Asian region. Bloomberg, citing unnamed traders, also points out that Japan and South Korea can now "sleep well", the authorities of which were afraid of gas shortages in the winter. At the same time, even despite the oversupply of LNG in Europe and the reorientation to the Asian market, prices still remain too high for some developing countries in the region (for example, Pakistan and Bangladesh).