The price of European gas contracts dropped as traders evaluated large inventories and progress in restarting a long-closed US LNG project against the possibility of rising demand.
Following 2 days of gains, contracts fell as 4.7% on Thursday. More fuel shipments are expect later this quarter after an accident shut down Freeport LNG of Texas last summer. The facility has since secured additional approvals to resume operations.- Europe’s Rising Reliance
After a light winter and energy-saving initiatives helped to keep gas supplies stocked and drive down costs. That should further increase Europe’s supply.
Next week, it’s expect to get colder in several regions of Europe, which could increase demand for heating. However, robust fundamentals offer a safety net, according to researchers of consultancy Alfa Energy Ltd. “Thus the effect of the upcoming cold snap is being dampened before it hits the market.”
However, given Russia’s drastic export cuts, traders are closely monitoring any indications that gas consumption is increasing after recent price decrease in both Europe and Asia. This is because this might result in tighter global supplies.
Shell Plc CEO Wael Sawan said on Thursday, “I would not call an end to the oil crisis. “I believe we still have work to do.“
Talking about China
According to economists, this year’s prospects will mostly depend as to whether Russian supplies continues to decline, the weather outlook. And the volume of gas China consumes as its economy recovers.
After China’s “zero COVID” policy U-turn. The consumption of liquefied natural gas (LNG) by Asia and China is now more directly impacted as Europe shifts there from Russian piped supplies to importing LNG
According to Refinitiv Eikon statistics. LNG imports by the European Union and the United Kingdom increased by approximately 70% for 2022 vs 2021. However imports by Northeast Asia & South Asia decreased by 7%.
“Everybody is looking to China. We predict a 10% increase in China LNG consumption this year. But would you truly feel confident discussing the effect of COVID on the Chinese economy?” Ed Cox, an LNG Editor at ICIS, remarked
Fuel exports to Europe continue to be greater than usual for this period of year. Despite the fact that China’s demand for LNG is currently low. However, according to Wael Sawan, CEO of Shell Plc, “a significant hunger” from the Asian country may return to the market.
However, in order to ensure that there would be enough gas for the upcoming winter. The Think-Tank Bruegel stated on Thursday. That the European Union must extend a target to reduce gas use in response to losing supplies by Russia for atleast 6 months to Oct this year.
In contrast to average for the same time over the past five years. EU nations decided last year to cut their demand for natural gas by 15% between August 1, 2022, to March 31, 2023.