According to Gas Infrastructure Europe (GIE) data, more than half of Europe’s natural gas storage facilities have been emptied. In the same period last year, the occupancy rate of storage facilities was approximately 70 percent.
After the /26 winter season, the low levels in storage facilities could not recover quickly in the summer months as in previous years. The main reason for this was that after the Iran War, the global liquefied natural gas (LNG) market tightened significantly, prices rose rapidly, and Asian buyers offered higher prices than Europe for spot liquefied LNG cargoes outside the Middle East.
Therefore, Europe faces the risk of failing to meet its target of reaching an 80 percent occupancy level in its storage facilities by early December.
Analysts warn that the low level in storage facilities could lead to sharp increases in natural gas prices in the November-March period, especially if a cold winter occurs.
Backwardation market structure formed
Due to disruptions in LNG supply from Qatar, a backwardation market structure has formed in which near-term contract prices are higher than long-term contracts. This situation does not encourage companies to store, and it is stated that it has made Europe more vulnerable to winter conditions and uncertainty about when LNG flows from the Middle East will return to normal.
Additionally, in a press release published by Wood Mackenzie, a research and consulting company based in Central Scotland, it was stated that Europe’s historically low natural gas storage levels put supply security at risk in the /27 winter.
Source: Bloomberght
