Global gas markets are in upheaval

Under the active sanctions and Russian countermeasures, the European Union has received a significant reduction in the amount of Russian natural gas, the United States has increased gas aid to Europe, Europe will look for natural gas to the Middle East, North Africa and Central Asia and other places.

Dutch TTF gas futures, the European benchmark, have seen sharp rises and falls over the past two years. Photo credit: ICE

Gas prices in Europe, which hit historic highs in August, have fallen sharply as temperatures lag, natural gas reserves are plentiful and LNG imports are piling up. Due to the lack of storage space, there is even a phenomenon of negative gas prices in Europe recently.

Shenwan Hongyuan Research report data show that as of November 10, the natural gas inventories of EU countries were 1066.21 terawatt hours, reaching 95.39% of the total inventory. Shenwan Hongyuan analysis team pointed out that although the inventory level of EU countries is very high, the actual gas storage capacity and winter supply capacity of member states vary greatly. This year, Russian gas supply has declined sharply, and the lack of increase in winter imports, in the context of the EU's overall gas supply tightening, the interconnection of natural gas between countries, especially the orderly distribution of gas at peak times, to avoid the imbalance between local supply and demand will become the next important challenge facing the EU.

Qin Yan, chief power and carbon analyst at the Oxford Institute of Energy Research, told the 21st Century Business Herald that the temperature in Europe in October was higher than the historical normal value, and the beginning of November was still warm, so the demand for heating declined, and the energy crisis was temporarily flat, but this is just an image, and winter will eventually come.

Qin Yan said that the current gas storage is still enough until February, but if there is a cold winter or a failure of pipeline gas such as Norway and North Africa, then by the end of January and February next year, Europe will face a very serious gas supply challenge.

"Weather is currently an important factor affecting the winter supply situation in Europe, including temperature and wind power output; In addition, the ability of the French nuclear power units to come online after the completion of the original overhaul schedule is also an important factor affecting the Western European electricity and gas markets." Qin Yan said.

The International Energy Agency (IEA) has warned that if Russia completely stops pipeline gas deliveries to Europe and LNG demand in the Chinese market continues to rise, the EU will face a shortage of 30 billion cubic meters of gas next summer.

For some gas exporters in the Middle East and North Africa, partial trade with Asian countries has also limited the flow of gas from these regions to Europe. It can be expected that with the arrival of winter in the Northern Hemisphere, competition for LNG resources between Northeast Asia and Europe will be inevitable.

Us' lying to win '

In the case of the gradual withdrawal of Russian natural gas from the EU market, the United States has become the biggest winner in this round of natural gas market adjustment.

According to data from China Gas Information Terminal, 15 European countries purchased 72.93 million tons of LNG resources in 2021; As of August 15 this year, the 15 countries in Europe have received 73.1 million tons of LNG resources, which means that the above countries have completed the LNG reception of last year in only 8.5 months.

In the first 10 months of this year, the United States shipped 575 LNG carriers to the 15 European countries, LNG exports reached 40.52 million tons, accounting for 42% of the total LNG imports of the 15 European countries.

In 2021, the United States exported less than 10 million tons of LNG, and in the first two months of this year, the United States exported 13.32 million tons of LNG, more than the whole of last year. In the first 10 months of this year, the United States exported about 59.85 million tons of LNG, a more than five-fold increase from all of 2021.

Australia, Qatar and the United States are the world's top three LNG exporters in 2021. Image credit: BP

From the price point of view, the European natural gas market price compared with the US market premium is obvious, the cost of European natural gas import compared with the Russia-Ukraine conflict has risen sharply, American natural gas producers and exporters have benefited from it, and Europe has become the "pick up man" of high price LNG resources in the United States.

The US used to import huge amounts of natural gas for domestic consumption, but the shale oil and gas revolution has rewritten the US energy landscape, turning the country from an importer into an exporter as domestic production has soared.

According to the BP Statistical Review of World Energy 2022, the world's top three LNG exporters in 2021 are Australia, Qatar and the United States. However, according to the U.S. Energy Information Administration (EIA), citing data from the International Gas Association, the United States has become the world's largest LNG exporter in the first half of this year.