Esince then Russia tightened the valves on natural gas shipments to Europe, markets fear that the continent could suffer a shortage of energy this winter. But Western Europe now has so much gas that the price has gone negative last month. Although the recent price crash does not provide full protection against an energy crisis, it does make for less of a crisis.
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Before Russia invaded Ukraine, it supplied almost 40% of Europe’s gas. After he said he would cut off gas to the Nord Stream 1 pipeline in August, the benchmark ttf price went up above €300 ($305) each Msh, 13 times the average in 2018-21. Against uncertain provision, the them setting a target for members to fill 80% of their gas storage by 1 November. Many countries replaced Russian pipeline imports with liquefied natural gas (lng). Germany, having no renewable resources, began building terminals and bought whatever gas was available.
By mid-autumn, the weather in much of Europe is usually cold enough for consumers to turn on the heat. This year, however, has been very balmy: the six largest economies on the continent enjoyed the warmest October in at least ten years. As a result, the them has exceeded its storage target, with stores now averaging 95% full.
Some Eastern European countries still have storage. However, most of the continent lng there are ports in Western Europe. With nearby storage sites full, lng the tankers had no place to load them. according to ice cream, consult, about 30 are distributed in European waters. With lng vessels raising $400,000 a day, traders have been willing to pay for someone to take gas off their hands, pushing prices below zero at one point.
The winter is still coming, and it is unlikely that the glut will last. Gas costs €35 each Msh for delivery today, but €110 for a guaranteed shipment in December and €142 for one in February, once the heaters are switched on.
But even €142 represents a decline from the €232 traders were paid in August for delivery in February. With the themand 1,000 twh of storage – enough for about seven weeks of winter – almost full, policymakers are now aiming to replenish stores by the winter of 2023-24. Although Europe managed to fill them once, a similar supply may not be available next year at any price. In a long energy war with Russia, this winter is only the first round.■
Chart sources: EIU; ENTSOG; Copernicus AE; Redundant data stream; The Economist
