Europe’s ability to buy gas before winter limited by Asia’s LNG price premium

TASS

MOSCOW, October 7. /TASS/. Europe faces constraints on its ability to purchase LNG on global markets as regional gas prices lag behind Asian prices, which command a premium for suppliers, ahead of the heating season, according to a TASS analysis of key gas indices in the two regions.

Asian spot LNG prices based on the JKM index have consistently exceeded prices at Europe’s most liquid hub, the TTF in the Netherlands, since the second half of September. On average, gas prices on the Asian market have been 8% higher than in Europe over this period. This currently makes the Asia-Pacific region a more attractive and profitable destination for LNG suppliers.

Against this backdrop, Europe is still falling short of last year’s record LNG import levels. Meanwhile, European Union countries continue injecting gas into their underground storage facilities ahead of winter, although the pace of stockbuilding will soon slow significantly. The warm weather seen at the beginning of the month will give way to more typical fall temperatures by the end of the week.

As of October 5, Europe’s underground gas storage facilities were 72.83% full, 15.13 percentage points below the five-year average for that date, compared with 82.9% a year earlier. This remains the lowest level for that date since records began in 2011. EU storage facilities contain around 79.8 bln cubic meters of gas, 11.7 bln cubic meters less than a year ago and the lowest level since 2013. Gazprom has forecast that European gas storage levels may not even reach 75% and that the region faces a difficult fall-winter season.

TASS reported earlier that Europe risks entering the heating season with record-low gas reserves. By the traditional start of the fall-winter period, EU countries may have their storage facilities only 70-75% full, which would be the lowest level ever recorded at the start of the heating season.

Under European Commission requirements, EU countries must ensure that their gas storage facilities are 90% full at some point between October 1 and December 1 each year. A 10% flexibility is permitted if storage-filling conditions are difficult. Thus, net injections into European storage facilities ahead of the 2026-2027 fall-winter period must total at least 68 bln cubic meters to meet the storage target. However, in hopes of a very warm winter, the European Commission is prepared to lower the target to 80% this year.

Fonte: TASS