Natural gas: price scenarios before winter

Europe’s natural gas reserves may be filling at historically high levels, and the EU’s energy platform joint procurement program may be progressing successfully, but no one can signal the end of the alarm about the possibility of a new energy crisis before winter.

Last week’s picture points to the high tension prevailing, but also to the headwinds blowing into the natural gas market, as reflected in the prices.

Developments accompanying strikes at Chevron’s facilities in Australia sent TTF rates up 11% above €36 per MWh. The strike concerns the Gorgon and Wheatstone LNG facilities, which supplied about 7% of the world’s LNG last year.

Instability

Global gas prices are expected to remain volatile even as Europe improves as winter enters this year, industry executives said at the GasTech conference in Singapore.

Michael Lewis, CEO of German utility company Uniper, said that while the European gas market is in a much better shape this year thanks to lower industrial demand and higher levels of storage, gas prices in Europe remain volatile.

“The most important thing is the storage location, it’s much better this year,” Lewis said. “We’ve already achieved the 90% target.”

“We have all the right factors, but prices are very volatile. Price elasticity has changed. The situation could be fragile,” he said.

Meanwhile, a senior Chevron executive said on Tuesday that the global LNG market is expected to remain volatile through 2025, and even a normal winter in Europe could be difficult for natural gas supplies.

“As we enter this winter, if it’s been a normal winter, it could be a very difficult time for some Europeans like Germany and other countries,” said Freeman Shaheen, head of Chevron’s global natural gas business.

Increase in demand

Uniper’s Lewis said the next two or three years would be difficult as European demand begins to rise, supported by more gas power generation, although the increase in LNG capacity expected from the US and Qatar between 2026 and 2028 will increase supply by about 20%. %.

He stressed that Germany “probably” needs between 25 and 30 gigawatts of new capacity from natural gas over the next seven to eight years.

“Looking longer term, we see European demand for LNG peaking in the mid-2030s and then starting to decline in line with EU decarbonisation targets,” he stressed.

Chevron’s Sahin also said Europe will still need natural gas to manage renewables shutdowns, and that Chevron still believes in a recovery in Chinese demand.

“I think we are all waiting for him to wake up, and when he does, it will be very quickly. It has not happened on this scale. China will attract all the goods… I still believe in the long-term prospects.”

Even after the recent rise, gas prices in Europe remain well below their peak levels reached last year. However, they are still higher compared to pre-crisis numbers, indicating that market volatility is expected to continue.

One might wonder why Europe’s natural gas reserves, which are currently about 93% full, do not alleviate concerns. The fact is that these stocks are not designed to cover the entire winter consumption. The European region, after a significant reduction in pipeline gas supplies from Russia in 2022, is increasingly relying on LNG imports.

Stockpiles could also dwindle quickly if there is a cold snap next winter and Europe is forced to compete with Asian buyers for the limited amount of available LNG.

Problems from Australia – Norway

The market has been witnessing a state of turmoil since the beginning of the month amid labor disputes in Australia – one of the largest producers of liquefied natural gas in the world – which threatens to limit global supplies as Europe prepares for the winter.

While Australia’s main exporter Woodside Energy Group Ltd. As we get closer to reaching a final agreement with workers, there is still uncertainty about the Chevron negotiations. And its employees.

In addition, flows into Europe from Norway’s leading supplier fell to their lowest level in two months, mainly due to seasonal maintenance at the giant Troll field. Supplies were completely stopped yesterday, Saturday, as of September 7.

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