Europe's Gas Oversupply Starts Easing: Marex

Europe's imports of LNG inflow continue to drop and are now a quarter of where they were at the end of May, according to research by Marex Spectron published June 19. Higher demand and lower supplies have cut about 15% off the price difference between the third and fourth quarters of the year to about €4/MWh, at the Dutch hub, the title transfer facility.

At that point it peaked at 12TWh, and they are unlikely to recover much lost ground as the US is due to export a lot less in June and July.

Pipeline flows across the borders have slightly increased during the past week, it said. partially offsetting the loss in LNG. "As a result, storage inventory levels have risen at a much slower rate and are now at ~76% capacity, which is lower than usual but still 7% higher than 2019.

Owing to carbon prices and cheap gas, Germany is burning equal amounts of gas and coal to produce electricity and the capacity utilisation of gas is 55% higher than last year despite the overall weakness in demand, it said.

Marex also foresees high pressure conditions gradually building up over western and central Europe during week 26, after a so far wet and cool start to June over much of the continent. The build-up will "send surface temperatures well above their long-term mean providing ground for the first significant heatwave of the summer season. At the same time, winds are expected to weaken. All of the above will likely push demand for gas higher." 

According to the US Energy Information Agency, the Henry Hub spot price fell 22¢ from a high of $1.70/mn Btu June 10 to $1.48/mn Btu June 18, owing to mild weather and lower global gas prices leading to LNG cargo cancellations.