The past month has not seen European natural gas storage recover to more normal levels with total storage levels remaining below the five-year range and well below last year’s level. Granted, storage levels for 2019 and 2020 were extremely high, but the market cleared almost all of that excess inventory in one winter, so if the weather is cold this winter, the European market may be headed for trouble. Prices are extremely high for this time of year and even higher than they have been the past two winters.
The forward curve indicates the mood for the coming months is similar with little price or perhaps volume relief coming. It is getting late in the season for storage levels to pop up too much, especially given the low volume of LNG and pipeline gas currently headed into the region.
The middle graph compares the volume of LNG arriving in select regional countries in August 2021 to the arrivals in August 2020. Note that the August 2021 values are estimated based on MTD numbers through the 25th. LNG imports into every country except Italy and Belgium are lower this year compared to last year.
Looking back at the top graph, in August last year, the storage build was very slow as there was little need to add additional volume into storage given the high levels throughout the summer months. Volumes coming into the region were quite low as US cancellations continued. This year, even though storage levels are lower, the volume coming in remains very low.
After discussing the outlook for the remainder of the year with market participants, most seem to believe that import levels will not pick up for the remainder of the summer and the autumn. The forecast has been adjusted downward accordingly (bottom graph).
Starting in January and throughout the winter, the forecast is relatively unchanged, as the additional LNG volumes will be needed to make up for low storage. In 2022, the forecast has been lowered somewhat with additional volumes headed to Asia, especially China where the demand forecast has increased substantially.
European natural gas storage
Europe August import comparison (2021 estimated)
Europe LNG import forecast comparison
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