Europe’s rush to fill gas storage amid LNG shortage drives prices higher — expert

TASS

MOSCOW, September 14. /TASS/. Europe's efforts to rapidly fill its underground gas storage facilities ahead of winter are driving up gas prices amid an acute crisis in the LNG market, Research Director at the Institute of Energy and Finance Alexey Belogoryev told TASS.

Earlier, the price of the October futures contract at the TTF hub in the Netherlands exceeded $1,000 per 1,000 cubic meters for the first time since December 2022. Meanwhile, spot gas prices at Europe's main trading hubs had already exceeded $1,000 per 1,000 cubic meters last week. Gazprom noted that the approaching heating season is rapidly reducing opportunities to replenish gas reserves in Europe's underground storage facilities, while gas prices have already reached levels seen during the energy crisis in late 2022. Russian President Vladimir Putin did not rule out that European gas prices could rise as high as $1,500 per 1,000 cubic meters.

"The current sharp rise in European prices is largely due to an increase in the pace of injections into underground gas storage facilities. European companies are trying to accelerate the process as much as they can in order to bring the EU's average storage level to at least 75%. At the previous pace seen in July-August, inventories would have reached only 70% of active gas storage capacity by November 1. This is increasing current demand from Europe and, amid an acute LNG shortage on the market, driving prices higher," Belogoryev said.

According to him, the gas market is currently experiencing an acute crisis due to the closure of the Strait of Hormuz and seasonally record-low gas inventories in EU underground storage facilities. Between March and August, the LNG market lost 15% of the supply that had been expected, and the situation is not improving.

At the same time, the expert considers a rise in European gas prices to $1,500-$2,000 this winter unlikely. "But prices could remain at $1,000-$1,300 for a short period, provided that the Strait of Hormuz remains blocked and injections into EU underground storage facilities remain just as intensive. Overall, however, for now I would expect prices to return closer to $800. Winter price dynamics are difficult to predict — they will depend decisively on weather conditions and the situation in the Strait of Hormuz, both of which are highly uncertain factors," he concluded.

Fonte: TASS