"Winter Is Approaching..." Europe Faces Shortage of Natural Gas for Heating

[Financial News]  

Europe's supply of natural gas for winter heating is in a state of emergency. It is becoming clear that the decision to wait, on the assumption that prices would fall if the Iran war ended quickly, was a serious miscalculation.
The Wall Street Journal reported on the 2nd (local time) that European Union (EU) gas storage facilities are currently only 65% full, the lowest level in at least 15 years, making it difficult for Europe to get through this winter.
European companies delayed purchasing gas in the hope that Qatar, the world's second-largest liquefied natural gas (LNG) exporter, would soon be able to resume exports through the Strait of Hormuz.
Meanwhile, LNG prices surged to their highest level in three and a half years. Expectations that the Iran war would end before this winter have faded as fighting between the United States and Iran recently resumed.
With prices rising further ahead of winter, European companies have entered the gas market and begun competing in bids against Asian companies.
Simon Turi, head of Western European gas at Swiss energy trading company MET Group, expressed concern, saying, "Europe is heading into winter with its lowest gas storage levels ever," and, "The market is pricing gas as if this were fine." He said market prices were not properly reflecting Europe's shortage of gas inventories ahead of winter and were being set with excessive complacency. He warned, "Something will inevitably break in the end." Either prices will surge belatedly, or widespread heating restrictions will be imposed, he cautioned.
The European Union's (EU) misguided policy decisions also appear to have worsened the situation. After experiencing a gas crisis following the outbreak of the war in Ukraine in 2022, Europe had required gas storage facilities to be at least 90% full by November 1, but lowered the requirement to 80% this year. The article says Europe was misled into making this erroneous decision by Donald Trump's repeated claims that an agreement with Iran was imminent.
However, Europe may be able to mitigate the shock to some extent because it has developed a degree of resilience during the four years of the war in Ukraine. Gas consumption has fallen by about 20% since 2022. As renewable energy capacity expanded significantly, the utilization of gas-fired power plants declined. Factories also improved gas efficiency, while those unable to do so shut down. Households lowered their heating temperatures as well.
Some observers, meanwhile, say the gas shortage is not particularly serious.
Beck McWilliams, an energy analyst at the Brussels-based think tank Bruegel, said, "The 90% target was based on conditions in 2021," adding that there is no need to fill gas storage facilities as completely as in the past.
The "super El Niño," which is expected to continue into next year, is also likely to ease concerns about heating to some extent. El Niño is expected to make this winter in Europe warmer than usual.

[email protected] Song Kyung-jae Reporter