The use of stored gas in Europe has passed bottom and gas tanks are now being refilled to be ready for next winter. (chart)
European gas tank storage hit a low of 55.36% full on April 1 and the volume held in tanks has grown since then to 57.94% full as of April 23, according to data from GIE (Gas Infrastructure Europe).
Gas use this year was exceptional low and the nadir of gas use that resulted in gas tanks being more than 50% full is the highest volume in storage at the end of the heating season in at least five years.
The lowest share of tank storage in recent years was in 2018, when Europe ended the heating season with less than 18% of its storage full. More typically the EU ends the season with tanks between 25% and 35% full.
Europe has been able to keep tanks so full thanks to ballooning supplies of LNG, imported from Qatar and the US. Half full tanks at the end of the heating season significantly reduce the pressure on the EU to refill the tanks to 90% full by November 1, as the EU has mandated in order to avoid another energy crisis this year.
Moreover, the European Commission this month has renewed its call for Europe to reduce gas consumption by 15% from the long-term average, which creates a significant surplus that will make it easier to refill the tanks on time.
Europe will remain comfortably supplied with LNG throughout the summer, with buyers required to meet storage targets and due to ongoing subdued gas use in Asia, analysts told Montel last week.
Qatari LNG imports in the UK hit a seven-month high in April, signalling there is currently an abundant supply, Montel reports. Asian demand also remains muted, despite a Chinese economic bounce-back following the end of its “zero-COVID” lockdown restrictions last year.
At the same time, due to the massive remake of Europe’s energy war with Russia and the destruction of the Nord Stream gas pipelines last September, Europe has been adding significant new storage capacity. More than 45bn cubic metres of capacity has been added in the Netherlands, Germany, Italy, Finland and Turkey since September, with more expansion plans in France and Greece expected to be completed later this year.
EU countries currently needed to inject around 34 bcm of gas by the start of November to meet storage targets – half of the 64 bcm needed at the same point last year.
For comparison, Europe typically consumes between 450 bcm and 500 bcm of gas per year. Pre-conflict Russia used to export about 150 bcm of gas to Europe a year but that plunged to 60 bcm in 2022 and is expected to fall further to 25 bcm this year, through the residual pipelines still operating via war-torn Ukraine and Turkey.
Last year Europe imported a record 130 bcm of LNG in 2022, up 60% on the 80 bcm it imported a year earlier. Global supply of LNG is expected to increase by 23 bcm this year, largely due to new liquefaction projects in Africa and the US.
At the current rates of refilling the tanks, the 90% full goal is likely to be hit as soon as late August, or early September, according to energy analyst Kpler. Last year the targets were met in September.
Low demand, high inventory leads to rise in floating storage
However, uncertainty remains, as Europe is in competition with Asia for limited LNG production. Currently, Europe is offering a premium on prices paid by Asia until September, with the June Asian LNG price hitting a fresh 21-month low on the JKM marker last week of $12.24 per mmBtu, having fallen by 60% year to date.
Currently Asian demand remains subdued after deliveries to the world’s two biggest importers, China and Japan, decreased in the first quarter by 2% and 7% respectively, according to a report from the Institute for Energy Economics and Financial Analysis.
The low demand and end to the heating season have led to a growth in LNG stored at sea, analysts say, due to the high inventories and low demand in Japan, China and South Korea.
Global floating inventories of LNG were at 0.55mn tonnes on April 20, indicated data from analytics firm Kpler, up 0.24mn tonnes from the same time last year. Floating storage is now above the five-year average.
“There are currently more floating volumes on a global level and the increase is coming out of Asia … reflecting tepid demand from major consumers Japan, China and South Korea,” Kpler LNG analyst Ana Subasic told Reuters.
Meanwhile, a logjam of LNG tankers off Europe’s coast in December has dissipated thanks to a mild winter, falling demand, higher than average inventory and the reopening of French terminals that were temporarily closed due to strikes.