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Europe is expected to experience a warm winter, and natural gas prices may be lower than last year
After experiencing energy shortages last year, the winter in Europe may be better this year. Due to global high temperatures, Europe may experience significantly higher than average temperatures this winter, and its own natural gas storage levels are also very abundant. However, Europe's energy supply is more dependent on sustained and stable imports of liquefied natural gas. Compared to pipeline natural gas, liquefied natural gas is highly dependent on sea freight and terminal terminals, which means everything is full of uncertainty, and even a workers' strike may cause market panic.
Warm Winter
With Europe expected to usher in another warm winter, natural gas prices may be much lower than last year. According to data from the Copernicus Climate Change Service, a climate monitoring agency of the European Union, temperatures in October will be above normal after the recent heatwave, and the weather in Western Europe may continue to be mild in the following months. The heating season in Europe usually starts in October, which will help alleviate global supply shortage concerns in recent weeks.
The Copernicus Climate Change Service said that the entire Europe is expected to be warmer and wetter than average this winter. The organization's data shows that between December of this year and February of next year, the likelihood of temperatures significantly above average in parts of the UK, France, Austria, Italy, and Germany exceeds 50%, while the likelihood of mild weather in the Iberian Peninsula is higher.
This may suppress natural gas prices, especially in the short term. Citigroup strategist Anthony Yuen said, "In the coming weeks, natural gas prices may still fall significantly, and the late onset of winter will further exacerbate the price decline
After the outbreak of the Russia-Ukraine conflict last February, Russia significantly reduced its natural gas supply to Europe, and the natural gas price in Europe soared. In August 2022, the natural gas price reached a historical high of 339.2 euros/megawatt hour, and then the natural gas price showed a downward trend. The latest data shows that on September 18th, the European benchmark natural gas fell by 6.5% to 34.11 euros per megawatt hour.
Long Zhong Information analyst Gao Pengfei said that since the beginning of this year, the situation in Russia and Ukraine has gradually eased, and the impact on the natural gas market has gradually weakened. Due to the continuous mild weather, inventory in Europe continues to increase, and downstream natural gas consumption in the market is basically met. In the later part of the heating season, panic sentiment in the European market decreases, and prices in the European natural gas market significantly decrease.
reserve
Since the outbreak of the Russo Ukrainian War, EU countries have either actively or passively cut off almost all energy relations with Russia. At present, many countries in Europe, such as Germany, have completely cut off importing natural gas from Russia, and others have significantly reduced their imports of Russian gas to rely on natural gas from the United States, Norway, Qatar, Azerbaijan, and Algeria.
In May last year, the European Union introduced strict gas storage regulations to ensure winter supply safety, requiring member states to increase their natural gas storage levels to 80% by November 1 of last year, and thereafter to reach 90% annually in the same period. In addition, the EU is also promoting the construction of new LNG receiving stations.
Currently, Europe's natural gas reserves are almost saturated. European Commission President von der Leyen announced on August 19 that Europe's natural gas reserves for this winter have exceeded 90%, meeting the schedule requirements ahead of schedule. Therefore, von der Leyen is confident that the natural gas consumption in Europe will be as stable this winter as last year, and the price will not rise sharply.
According to the latest data from the European Natural Gas Organization (GIE), on August 19th, the level of natural gas storage in Europe had reached 91%, exceeding the EU's target of filling at least 90% of natural gas storage facilities by November 1st each year, which is also the highest record for this time of the year.
It is understood that the annual demand for natural gas in EU countries is approximately 350 to 500 billion cubic meters, while the maximum storage capacity of EU natural gas storage facilities is 100 billion cubic meters. Goldman Sachs analysts say that having a large inventory in Europe means that the risk of natural gas prices soaring before winter is low.
Meanwhile, in order to prevent energy shortages, from November 2022 to March this year, the European Union issued a series of measures to proactively reduce electricity demand. According to IEA data, natural gas consumption in OECD European countries decreased by 10% year-on-year in the first half of this year. In the first half of this year, Europe's electricity generation decreased by 61 TWh year-on-year, a decrease of 4.6%, reaching a new low since 2008.
In addition, the capacity of EU gas storage facilities is limited, and relying solely on "gas hoarding" cannot guarantee safety. The International Energy Agency believes that even if Europe's natural gas storage facilities reach nearly 100% reserves by October, it cannot guarantee that there will be no future market tension. The price of natural gas in Europe depends not only on the weather this winter, but also on factors such as the adequacy of liquefied natural gas imports and the demand for natural gas in other global markets. As global natural gas supply remains tight this year, any unplanned interruption may disrupt the natural gas supply and demand balance in Europe.
risk
However, even if the warm winter arrives as expected, any supply interruption may lead to a temporary surge in natural gas prices. Lin Boqiang, Dean of the China Energy Policy Research Institute at Xiamen University, stated that the EU's early achievement of winter natural gas storage targets is a boost to the EU economy. However, the energy supply security situation in Europe remains fragile, relying more on sustained and stable imports of liquefied natural gas (LGN). Compared to pipeline natural gas, liquefied natural gas is highly dependent on shipping and terminal terminals, which means everything is full of uncertainty.
As global supply risks increase, natural gas prices have risen, exacerbating market concerns about fuel supply before the arrival of the winter heating season in Europe. Last month, a strike in Australia unexpectedly "detonated" the European natural gas market thousands of miles away.
On August 9th local time, workers from Chevron and Woodside Energy Group's Australian factory voted in favor of a strike. At that time, the Dutch TTF natural gas futures price, known as the "European natural gas price vane," rose by 40%, marking the largest increase since March 2022 and breaking through 40 euros per megawatt hour for the first time since June.
Australia holds a significant position in the global LNG market. According to Longzhong Information, in 2022, the global LNG liquefaction terminal terminals exported a total of 39.959 million tons of liquefied natural gas, with Australia, Qatar, and the United States ranking among the top three LNG exports, accounting for 20.15%, 20.07%, and 19.05%, respectively. The export volume was 8.05 million tons, 8.02 million tons, and 7.61 million tons, respectively, with the three countries accounting for approximately 69.7% of the total export volume.
The strike was originally scheduled to end at the end of the month, but the union expressed its intention to extend the strike period. Chevron has confirmed that it has received a notice from the union regarding the extension of the strike until October 14th. At present, these two factories have been upgraded to full-scale strikes, increasing the risk of natural gas production interruption.
Warm Winter
With Europe expected to usher in another warm winter, natural gas prices may be much lower than last year. According to data from the Copernicus Climate Change Service, a climate monitoring agency of the European Union, temperatures in October will be above normal after the recent heatwave, and the weather in Western Europe may continue to be mild in the following months. The heating season in Europe usually starts in October, which will help alleviate global supply shortage concerns in recent weeks.
The Copernicus Climate Change Service said that the entire Europe is expected to be warmer and wetter than average this winter. The organization's data shows that between December of this year and February of next year, the likelihood of temperatures significantly above average in parts of the UK, France, Austria, Italy, and Germany exceeds 50%, while the likelihood of mild weather in the Iberian Peninsula is higher.
This may suppress natural gas prices, especially in the short term. Citigroup strategist Anthony Yuen said, "In the coming weeks, natural gas prices may still fall significantly, and the late onset of winter will further exacerbate the price decline
After the outbreak of the Russia-Ukraine conflict last February, Russia significantly reduced its natural gas supply to Europe, and the natural gas price in Europe soared. In August 2022, the natural gas price reached a historical high of 339.2 euros/megawatt hour, and then the natural gas price showed a downward trend. The latest data shows that on September 18th, the European benchmark natural gas fell by 6.5% to 34.11 euros per megawatt hour.
Long Zhong Information analyst Gao Pengfei said that since the beginning of this year, the situation in Russia and Ukraine has gradually eased, and the impact on the natural gas market has gradually weakened. Due to the continuous mild weather, inventory in Europe continues to increase, and downstream natural gas consumption in the market is basically met. In the later part of the heating season, panic sentiment in the European market decreases, and prices in the European natural gas market significantly decrease.
reserve
Since the outbreak of the Russo Ukrainian War, EU countries have either actively or passively cut off almost all energy relations with Russia. At present, many countries in Europe, such as Germany, have completely cut off importing natural gas from Russia, and others have significantly reduced their imports of Russian gas to rely on natural gas from the United States, Norway, Qatar, Azerbaijan, and Algeria.
In May last year, the European Union introduced strict gas storage regulations to ensure winter supply safety, requiring member states to increase their natural gas storage levels to 80% by November 1 of last year, and thereafter to reach 90% annually in the same period. In addition, the EU is also promoting the construction of new LNG receiving stations.
Currently, Europe's natural gas reserves are almost saturated. European Commission President von der Leyen announced on August 19 that Europe's natural gas reserves for this winter have exceeded 90%, meeting the schedule requirements ahead of schedule. Therefore, von der Leyen is confident that the natural gas consumption in Europe will be as stable this winter as last year, and the price will not rise sharply.
According to the latest data from the European Natural Gas Organization (GIE), on August 19th, the level of natural gas storage in Europe had reached 91%, exceeding the EU's target of filling at least 90% of natural gas storage facilities by November 1st each year, which is also the highest record for this time of the year.
It is understood that the annual demand for natural gas in EU countries is approximately 350 to 500 billion cubic meters, while the maximum storage capacity of EU natural gas storage facilities is 100 billion cubic meters. Goldman Sachs analysts say that having a large inventory in Europe means that the risk of natural gas prices soaring before winter is low.
Meanwhile, in order to prevent energy shortages, from November 2022 to March this year, the European Union issued a series of measures to proactively reduce electricity demand. According to IEA data, natural gas consumption in OECD European countries decreased by 10% year-on-year in the first half of this year. In the first half of this year, Europe's electricity generation decreased by 61 TWh year-on-year, a decrease of 4.6%, reaching a new low since 2008.
In addition, the capacity of EU gas storage facilities is limited, and relying solely on "gas hoarding" cannot guarantee safety. The International Energy Agency believes that even if Europe's natural gas storage facilities reach nearly 100% reserves by October, it cannot guarantee that there will be no future market tension. The price of natural gas in Europe depends not only on the weather this winter, but also on factors such as the adequacy of liquefied natural gas imports and the demand for natural gas in other global markets. As global natural gas supply remains tight this year, any unplanned interruption may disrupt the natural gas supply and demand balance in Europe.
risk
However, even if the warm winter arrives as expected, any supply interruption may lead to a temporary surge in natural gas prices. Lin Boqiang, Dean of the China Energy Policy Research Institute at Xiamen University, stated that the EU's early achievement of winter natural gas storage targets is a boost to the EU economy. However, the energy supply security situation in Europe remains fragile, relying more on sustained and stable imports of liquefied natural gas (LGN). Compared to pipeline natural gas, liquefied natural gas is highly dependent on shipping and terminal terminals, which means everything is full of uncertainty.
As global supply risks increase, natural gas prices have risen, exacerbating market concerns about fuel supply before the arrival of the winter heating season in Europe. Last month, a strike in Australia unexpectedly "detonated" the European natural gas market thousands of miles away.
On August 9th local time, workers from Chevron and Woodside Energy Group's Australian factory voted in favor of a strike. At that time, the Dutch TTF natural gas futures price, known as the "European natural gas price vane," rose by 40%, marking the largest increase since March 2022 and breaking through 40 euros per megawatt hour for the first time since June.
Australia holds a significant position in the global LNG market. According to Longzhong Information, in 2022, the global LNG liquefaction terminal terminals exported a total of 39.959 million tons of liquefied natural gas, with Australia, Qatar, and the United States ranking among the top three LNG exports, accounting for 20.15%, 20.07%, and 19.05%, respectively. The export volume was 8.05 million tons, 8.02 million tons, and 7.61 million tons, respectively, with the three countries accounting for approximately 69.7% of the total export volume.
The strike was originally scheduled to end at the end of the month, but the union expressed its intention to extend the strike period. Chevron has confirmed that it has received a notice from the union regarding the extension of the strike until October 14th. At present, these two factories have been upgraded to full-scale strikes, increasing the risk of natural gas production interruption.
In this situation, some industry insiders pointed out that this winter may be much safer than last year, but also warned that European natural gas prices will continue to fluctuate in the next one to two years. Paul Gallo, CEO of the Italian National Gas Distribution Company, said, "Currently, the EU's natural gas reserves are almost full, but I believe that there will be significant fluctuations in European natural gas prices in the next 12 to 24 months.
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