EU gas reserves at lowest level in two decades
European Union gas storage facilities are filled to about 66%, the lowest level for this time of year in nearly two decades. This could intensify competition between Europe and Asia for available liquefied natural gas cargoes ahead of winter, OilPrice reports.
Stock levels are significantly below the five-year average, which exceeds 80%. According to Bloomberg calculations, at current prices Europe needs to purchase more than $8.1 billion worth of gas to reach even the minimum storage-filling target of 75%.
Reduced availability of LNG supply
According to OilPrice, competition for LNG has intensified due to a reduction in available global supply. The war in the Middle East has disrupted liquefied gas deliveries from Qatar: cargoes remain blocked in the Strait of Hormuz.
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Summer heat has simultaneously increased demand for electricity and gas to replenish depleted storage facilities. The combination of these factors pushed European benchmark gas prices to three-and-a-half-year highs. High prices and a situation in which front-month futures are more expensive than contracts with later delivery dates restrained stockpiling for most of the summer.
Competition between Europe and Asia
Kpler lead LNG analyst Go Katayama told Bloomberg that a colder winter could result in global competition for fuel. ING analysts noted that current shipping conditions favor sending spot LNG cargoes to Europe rather than Asia, following several months during which Asian buyers offered higher prices.
ING strategists Warren Patterson and Eva Manthey expect competition between the two regions to intensify as winter approaches in the Northern Hemisphere, especially if Qatari LNG remains largely absent from the market until the end of the year.
