Europe Is Suffering in the Heat, but Winter Could Bring the Cold — Heating Gas Inventories at a 15-Year Low

[Financial News]  

Europe, which has been literally melting under this summer's heat wave, is increasingly worried that it may shiver through the winter. Natural gas inventories are at their lowest level in 15 years, raising concerns that heating could become difficult.
The Financial Times reported on the 29th local time that Europe will enter the winter heating season with gas inventories at their lowest level in at least 15 years.
According to consulting firm Wood Mackenzie, the European Union (EU) is expected to fill only 76% of its storage facilities during this year's gas replenishment period. Gas is typically stored from April to October, the off-season, for use in winter heating.
According to Gas Infrastructure Europe, this year's projected storage level of 78% is the smallest for the off-season since at least 2011, or 15 years.
The war between Iran and the United States and Israel, which began on February 28, is a key obstacle to rebuilding gas inventories.
The Strait of Hormuz, which handles 20% of global oil and natural gas shipments, was blocked for a time by the war. Although it has reopened, traffic is still not smooth. In addition, Qatar and the United Arab Emirates, two major gas producers, cut output after Iranian airstrikes damaged facilities and because they have nowhere to store gas.
On top of that, Europe started the year with gas storage levels already far below normal, at just 28%, after last winter's severe cold. Gas Infrastructure Europe said current storage stands at 48% of capacity.
Whether Europe's gas storage facilities can reach the 80% level recommended by the European Commission (EC), or at least 75%, will depend largely on Qatar and others.
Reports that empty liquefied natural gas (LNG) carriers are entering Qatar have raised the likelihood that gas production will resume.
However, it remains unclear when production can return to prewar levels.
In a recent note, Goldman Sachs commodities analyst Samantha Dart projected that if the Ras Laffan Industrial City LNG facility reaches full operation by the end of July, Europe's gas storage could be 74% full by the end of October. She added, however, that if full operation is delayed until the end of August, the figure would reach only 70%.
If gas runs short, Europe will have to face a cold winter this year, along with soaring heating bills.

[email protected] Song Kyung-jae Reporter