From Shortage to Glut: Europe’s Over-Supply of Natural Gas
Europe's natural gas surplus could lead to a glut, as stocks are expected to deplete to a post-winter low of 606 TWh, slightly down
The impact of a mild winter on Europe's natural gas reserves has been significant, with heating demands at Frankfurt being 8% below the 10-year average, and 17% below the long-term average.
Reduced consumption by industries, a mostly mild winter, and steady inflows of liquefied natural gas have helped push natural gas prices down more than 25% this year.
The European gas market is facing over-supply issues, and if the region does not slow down purchases, too much gas will be floating around in the market.
Traders are also waiting for news on the reopening of the Freeport LNG plant in the US, formerly a major supplier to Europe before an explosion last summer shuttered shipments.
Countries within the European perimeter will reach 100% inventory fill as early as August if LNG imports continue at the current pace, according to Morgan Stanley.
Many European countries had hoarded natural gas at higher prices in anticipation of Russia cutting off supplies due to Western sanctions, but the recent warmer weather has left the region with near-record gas inventories.
The surplus in natural gas has declined slightly from the peak, but the European gas market is still oversupplied, moving from fears of shortage last year, to potentially a position of glut later this year if current low demand and strong LNG imports continue.
To prevent an oversupply of natural gas in the market, countries need to take measures to slow down purchases and avoid a potential glut in the European gas market.
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