The overall gas situation in Europe remains stable with gas stores currently almost 96% full as of October 1. However, overall price trends indicate that EU gas prices have been increasing since late May when prices on the TTF neutral gas price index hit a yearly low of around €23/MWh. The gradual rise in TTF gas prices over the past several months reflects the extent to which the continent’s energy security has become dependent on the availability of supply in the global LNG market.
For example, prices on the index rose above €40/MWh over the last week of September following a strike at two Chevron LNG facilities in Australia and a maintenance outage at Norway’s Troll gas field. The strikes at Chevron’s Wheatstone and Gorgon facilities lasted from September 8 until September 22 and caused EU gas prices to rise due to fears that disruptions at the facilities would increase Asian competition for European gas purchases. EU gas markets were also unsettled by ongoing maintenance at the Freeport, Sabine Pass, Corpus Christi, and Cove Point LNG plants in the U.S. that resulted in a decline in overall U.S. LNG exports in September.
The European gas market will also face some medium-term supply challenges that could further increase the continent’s dependence on LNG. For example, the continent could experience a further drop in Russian pipeline gas supplies by the end of 2024 as Ukraine has indicated that it is unwilling to negotiate a new gas transit agreement with Russia once the current five-year deal expires.
Additionally, an EU agreement with Azerbaijan to purchase up to 20 bcm of natural gas per year via the Trans Anatolian (TANAP) pipeline has stalled as European buyers appear unwilling to commit to additional gas deals. Future gas purchases from Azerbaijan could also become more complicated due to the country’s ongoing conflict with Armenia over the Nagano-Karabakh region.
On the policy front, EU member states have failed to make progress on new rules to revamp the bloc’s electricity market as France and Germany continue to disagree over whether subsidies should be granted to nuclear energy plants. Negotiations over the reforms have been stalled since June and diplomats are currently considering a proposal to simply remove the proposed subsidies altogether before a meeting of EU energy ministers is scheduled to take place on October 17. However, EU countries have managed to negotiate an increase in renewable energy targets for member states with a new 42.5% clean power target set for the bloc by 2030. The new rules also loosen regulatory procedures to allow European renewable energy manufacturers to be more competitive with solar component manufacturers from China.
European gas store levels exceed 95%
The EU has exceeded its 90% gas storage target for the 2023/24 winter season with store levels in all member countries surpassing their target as of October 1. However, the rate at which countries will be able to maintain these stores once the winter season hits is dependent on winter temperatures as well as the ability of states to reduce their natural gas consumption levels by the EU’s voluntary 15% target. The ability of increasingly war-weary member states to continue cutting their gas consumption levels for a second straight winter will also be tested if the upcoming winter proves to be particularly cold.
A more in-depth outlook for the coming European winter season will be provided in next month’s EA Watch as it is still too early to provide an accurate winter forecast. However, data from Everstream Analytics indicates that the trend for winters in Europe has been on the warmer side over the last 23 winters, with the last cooler than normal winter occurring in 2012.
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