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Europe threatens to trigger a global scramble for natural gas supplies
The world is bracing for a fight for natural gas supplies this year, prolonging the pain of higher bills for consumers and factories in energy-hungry Europe and putting poorer emerging countries from Asia to South America at risk of getting priced out of the market.
For the first time since the energy crisis was turbocharged by Russia’s war in Ukraine, Europe risks failing to meet its storage targets for next winter, setting the stage for one last scramble for supplies before new liquefied natural gas capacity starts to ease the situation next year.
While Europe has enough gas reserves to get through this winter and prices have eased since the start of the year, inventories are being eroded by cold weather, which swept across the continent this weekend. Supply options have been squeezed since the start of this year, when Russian pipeline deliveries through Ukraine ceased following end of a transport agreement.
“There will certainly be an energy gap in Europe this year,” said Francisco Blanch, commodity strategist at Bank of America Corp. “That means that all the incremental LNG that’s coming online this year around the world will go into making up for that shortfall in Russian gas.”
To cover its projected demand, Europe will need to import as much as an extra 10 million tons per year of LNG — about 10 per cent more than in 2024, according to Saul Kavonic, an energy analyst at MST Marquee in Sydney. New export projects in North America could help ease market tightness, but that hinges on how quickly the facilities can ramp up production.
With fewer options to restock for next winter, Europe will need LNG shipments, pulling some away from Asia, home to the world’s biggest consumers. Depending on how demand shapes up, the competition would drive prices higher than countries like India, Bangladesh and Egypt can afford and weigh on Germany’s economic recovery.
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