Page 17 - GLNG Week 46 2022

GLNG EUROPE GLNG

European gas prices climb again

as continent heads for winter

PRICES AFTER spiking at €339 per MWh ($3,741 per industrial users dropped 33%, and usage by large
1,000 cubic metres) in late August, the front- industrial users fell by 27%.
month contract at the Dutch TTF natural gas Besides high prices and EU targets, demand
price slumped to below €100 per MWh at the has also been lower because of warmer-than-
end of October. Even though prices have risen usual weather recently. This has meant that
again in early November, they remain far below heating demand is low, and the continent’s gas
the level reached during the summer. inventories are being conserved.
The reasons for the sharp spike in prices Another factor has been ample LNG supply.
this summer, even though prices are typically Reports are emerging of LNG vessels queuing at
lower during the warmer months of the year, European ports to offload their cargoes, as high
are well-known. Demand rebounded quickly prices have meant that Europe rather than Asia
after the ending of coronavirus (COVID-19) is now the premium market.
pandemic measures, Russia made steep cuts to High LNG imports have helped mitigate the
supply in the months after beginning its war impact of a further decline in Russian gas supply
in Ukraine, renewables underperformed and a volumes. Russian deliveries came to a record low
summer heatwave that increased air-conditioner of only 2.1bn cubic metres in October, or 5.6%
use and curbed hydroelectric generation. below the previous low seen in September.
The steep decline in prices since August was Lower gas prices are likely to be only tempo-
the result of Europe’s success in expanding gas rary, as mild weather gives away to cold winter
volumes in storage over the injection period, in temperatures. There could also be a further cut
spite of high prices. in Russian supply, and any outages in LNG or
The continent also effectively cut its gas other pipeline imports into Europe would exac-
demand over recent months, exceeding EU erbate the situation. At the same time, there is
targets, as high prices simply led to demand limited upside for increased supplies, as there
destruction. According to Bloomberg, citing is hardly any extra global LNG capacity due to
data from Engie’s market-analysis platform come online until next year.
Energyscan, demand in Western Europe was Rystad Energy noted last week that the
down 22% year on year in October. The electric- rebound in futures prices in November is a sign
ity sector increased consumption by 14%, but of things to come.™
demand from residential, business and small

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