Europe must keep gas demand at 10% below five-year average: ING
Europe must maintain its gas demand at 10% below the five-year average this year from April to balance its market, Dutch bank ING estimated on March 2.
EU gas storage volumes were at 60.6% of capacity as of March 1 – representing an historic high for the time of year. This has caused TTF front-month prices to slide under €50/MWh ($565/'000 m3). As of around 07:20 GMT, the April contract was trading at €46.55/MWh.
ING now predicts that the EU will end this heating season with its storage facilities 54% full, versus a previous expectation of 50%. This is significantly higher than the 26% seen at the end of the last heating season, as well as the 34% five-year average. The EU will therefore only need to add around 36bn m3 to its stocks to reach its 90% capacity target by November 1. Over last year's injection period, 67bn m3 was added.
"This should be much more manageable for the region and in fact, there is a growing risk that storage could essentially be full ahead of the next heating season, which suggests the potential for further price weakness in the third quarter," ING said in its research note.
The bank has also cut its 2023 TTF forecast to €57/MWh from €70/MWh, but the potential for further downside is limited as a result of coal-to-gas switching.
"Risks to our view include a stoppage of remaining Russian pipeline gas flow to Europe, a stronger-than-expected recovery in Chinese LNG demand and a stronger European demand response to the more recent weakness in prices," ING said, predicting Chinese import appetite will grow 10% this year after falling in 2022 for the first time in history.
"It is worth noting that the EU is still in deficit and so will need to continue to see demand destruction through this year to manage – we are assuming 10% below the five-year average from April onward," the bank said.