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The world is becoming awash with natural gas, pushing prices lower and creating an overabundance of the fuel in both Europe and Asia — at least for the next few weeks.
The trend has azbeen a rare sight over the past year since the war in Ukraine upended energy markets and Europe rushed to secure as many alternative supply sources as possible.
Now, inventories are filling up from South Korea to Spain, a result of mostly mild winter weather and efforts to reduce consumption. Tankers filled with liquefied natural gas — a stopgap in replacing lost Russian pipeline flows — now often struggle to find a home, spending weeks idling at sea.
Demand for gas typically slides as the heating season ends, before hotter weather lifts cooling needs later in the summer. The fuel then mainly goes into storage sites to prepare for the next season, but this year, refilling efforts in Europe may be completed as early as late August, Morgan Stanley said.
“There does appear to be a brief gas glut that should sustain pressure on LNG prices in the next few weeks, potentially nudging benchmarks slightly lower,” said Talon Custer, a Bloomberg Intelligence energy analyst.
While gas prices in Europe and Asia have plummeted from last year’s highs, they’re still well above the average of the last ten years, signaling possible concern that the current glut could disappear. Custer says prices “may be close to a floor” as cheaper gas costs could spur additional demand.
All eyes are on the summer weather, as any extreme heat and droughts could boost consumption. – Bloomberg
Online Reporter