According to analysts, a further increase in gas prices in Asia will inevitably lead to a reduction in LNG supplies to Europe.
They also point out that amid the rise in the cost of natural gas in Asia, Russia is highly likely to cut its supplies to Europe. At the same time, the filling of gas storage facilities (UGS) goes very slowly and unevenly. The EU government expressed concerns about a probable gas shortage ahead of the start of the heating season.
Gas Infrastructure Europe revealed that on August 19, European UGS facilities were filled by 62.64%. In 2020, before the start of the heating season, the total occupancy of European gas storage facilities totaled 98%. At the moment, the rate of injection of natural gas into storage facilities is extremely low. It once again underlines the region’s dependence on Russian energy exports.
This spring, the situation was different. According to Gas Infrastructure Europe, in April 2021, LNG imports to Europe reached a record high of 321 million cubic meters per day. However, later, the volume of supplies of natural gas decreased sharply. By the beginning of the summer, they did not exceed 175 million cubic meters per day. In the first half of 2021, LNG supplies to Europe dropped by 16 billion cubic meters per day. The EU could not pump up gas facilities even by increasing gas supplies from Russia, Azerbaijan, and Algeria.
Additionally, Russian state-controlled gas giant Gazprom announced its intention to increase LNG supplies after the launch of Nord Stream 2. Notably, now, the company has shifted focus to Asian countries, where natural gas is more expensive than in Europe.
Importers are afraid that in the winter in Southeast Asia, natural gas will again rise in price. This is why China, Japan, and South Korea are trying to accumulate the maximum amount of LNG in gas storage facilities.
Naturally, the US is doing its part in this situation as it is one of the main suppliers of LNG to the European market. In the first half of this year, US gas exports to Europe soared by 42%, to 9.6 billion cubic feet per day. About 37% went to the European markets, and the rest - to the countries of Asia and Latin America.
In August, LNG imports from Asia to Europe tumbled to 149 million cubic meters per day. This volume is very small for the accumulation of gas stockpiles necessary for the uninterrupted supply among European consumers. As a result, Europe has to hastily find a solution on how to fill its UGS inventories as much as possible in order to avoid a shortage of LNG in the winter period.
