Europe’s underground gas storage reserves are still standing at their multi-year lows in September, less than a month before the start of the winter season. A similar picture, although not so dramatic, emerges when considering inventory levels at the regional liquefaction facilities. In normal times, LNG send-out helps to rapidly compensate for resource shortfall within a particular market area, but so far this has not worked quite well.
Today more than ever before, volumes accumulated at onshore and floating terminals could have really benefited players, despite the fact that the total designed capacity of European LNG reservoirs accounts for only 10pc of the region’s UGS capacity. However, the twofold reduction in seaborne imports to Europe during the period from March to July-August 2021 resulted in LNG inventories falling below the level recorded at the end of Q3 2018. As you remember, it was nearly three years ago when European gas market entered a new era in which it has become closely linked by flexible LNG flows with other key global trading hubs.
Without regular receipts of spot cargoes, Europe was actually prevented from utilizing such an effective balancing tool as LNG send-out for most of summer 2021. Between April and August, regional LNG terminals decreased supplies into the transmission grid by more than two times, to 1 500 GWh/d on average. Yet, that period was marked first by the large-scale maintenance at Norwegian fields during Q2 and then by lower Russian imports along the Yamal route.
After a long break, LNG inventories, as well as send-out from the European terminals, started to rise in early September as more cargoes were being directed towards the west. But the question is how stable and sustainable this month’s increase in LNG supplies to Europe? Given unseasonably high Asian prices and still restricted hydroelectric power generation in Brazil, it will likely be extremely difficult for European buyers to draw as much LNG into the region as is needed to return the market to normal conditions.
Source: Yakov Grabar
See original post by Yakov at LinkedIn.
