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Low liquefied natural gas spot prices amid abundant supply and weaker Asian spot demand this year have helped Europe to fill its storage tanks to more than average levels this summer.
Natural gas prices in Europe dropped to a ten-year low in early July as Russia and the United States continue to fight for market share.
Thanks to the lowest natural gas prices in a decade, storage tanks in many European countries are higher than the five-year average well ahead of the coming heating season. Traders continue to ship LNG cargos to Europe, potentially waiting for trading opportunities when the winter season approaches and prices rise.
Yet, with storage fuller than what is usual for this time of the year, the question remains how much more of the global LNG supply Europe can take in ahead of the northern hemisphere’s winter heating season, Bloomberg’s Anna Shiryaevskaya writes.
According to Gas Infrastructure Europe, gas storage in Europe was 89.65 percent full as of August 20, with storage in countries like Austria, Belgium, the Czech Republic, Denmark, France, Germany, and the Netherlands more than 90 percent full.
Although northwest Europe has traditionally been the place of LNG imports, this summer Spain is importing high volumes of the super-chilled fuel, as electricity demand in an above-normal temperature summer grows while water for hydropower capacity runs dry, according to Bloomberg estimates.
Spain, which accounts for nearly a third of Europe’s gas storage capacity, has imported more LNG cargoes this year, thanks to the low spot prices.
This year Spain has seen a coal-to-gas switch in the power sector as utilities benefit from importing low-priced spot LNG to use in gas-fueled power generation, Energy Aspects’ gas analyst Leyra Fernandez Diaz told Bloomberg.
Spain’s gas market could be indicative of the European market which has been upended in the past two years with spot LNG volumes not linked to oil prices—a change from oil-based pricing of long-term gas pipeline supplies.
U.S. exports of LNG to Europe have surged by 272 percent since July 2018, when the United States and the European Union pledged to boost their strategic energy cooperation, the European Commission said in May.
At the end of last month, the EC said that the since July 2018, the EU has significantly boosted its LNG imports from the U.S.—by more than 367 percent in one year. So far this year, one third of all U.S. LNG exports have gone to the EU. The U.S. is the EU’s third largest supplier of LNG, while the EU has emerged as the primary destination of U.S. LNG exports, according to the European Commission.
In Q2 2019, global LNG demand was 86 million tons, up by 16 percent from Q2 2018, according to GasLog Ltd, owner, operator, and manager of LNG carriers.
Due to Europe’s soaring LNG imports, the two largest pipeline gas suppliers to the continent—Russia’s Gazprom and Norway’s Equinor—have lost market share for the first time in at least four years, Reuters reported earlier this week, quoting data and calculations from Refinitiv.
Going forward, the share of LNG in Europe’s gas deliveries will depend on the global LNG demand and supply picture and spot prices, but there’s no doubt that LNG continues to upend the natural gas market in Europe.
Based on www.oilprice.com by Tsvetana Paraskova