Europe’s gas inventories are rebuilding after winter at the fastest rate on record as the region’s buyers outbid competitors from Asia to acquire as much gas as possible at any price.
Stocks in the European Union and United Kingdom (EU28) have risen by 151 terawatt-hours (TWh) since the start of April and 159 TWh from their post-winter low on March 19.
Storage is filling even faster than during the lockdowns in the first wave of the pandemic in 2020, according to data from Gas Infrastructure Europe (“Aggregated gas storage inventory”, GIE, May 17).
The storage deficit that emerged in the second quarter of 2021 and persisted through the winter has been eliminated (https://tmsnrt.rs/37VE1r6).
Stocks are now at 450 TWh, almost exactly in line with the prior 10-year average and 21 TWh above the pre-pandemic five-year average for 2015-2019.
Europe’s gas buyers have proved willing to pay much more for deliveries in the short term than their counterparts in Asia.
Futures contracts for deliveries in July 2022 to Northwest Europe are trading at almost $100 per megawatt-hour compared with just $68 for deliveries to Northeast Asia.
ASIA GAS STOCKS
Asia’s LNG buyers have been less active than normal and inventories in the region have been allowed to fall compared with the seasonal average.
China does not publish gas inventory levels, but LNG imports have been significantly below prior-year levels every month so far in 2022, according to customs data.
LNG imports declined to 17.3 million tonnes in the first three months of the year compared with the 19.7 million in the same period in 2021, the first decline for at least seven years.
China’s increasing coronavirus outbreaks and lockdowns have severely disrupted industrial activity and household spending, which is likely to have reduced gas consumption.
But most gas consumption comes from residential and commercial heating rather than power generation so the downturn likely reflects a decision to allow stocks to fall rather than pay exceptionally high prices.
Japan’s gas inventories have also been allowed to decline as utilities decline to pay record prices in competition with Europe.
Stocks fell to 1.49 million tonnes at the end of February, the latest data available, the second lowest for the time of year since 2015.
Japan imported significantly less LNG in both January and February this year than in 2021, data from the Ministry of Economy, Trade and Industry show.
To some extent, Asia’s importers have stepped aside as Europe races to fill storage as quickly possible in case pipeline supplies from Russia are interrupted by the war with Ukraine and sanctions.
But it likely means Asia’s buyers will have to accelerate purchases later in the year, keeping prices elevated, even if Europe’s own storage remains on track to become full over the next few months.