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Europe Likely To Avoid Soaring Natural Gas Prices This Winter

1. Unprecedentedly Low Cushing Stocks Jeopardize Hub Operations

- Oil prices have been greatly boosted by crude inventories in Cushing, the delivery point for US WTI futures, falling to 22 million barrels, the lowest level since June 2022, potentially jeopardizing future pipeline transportation.

- Accounting for roughly 12 MMbbls of pipeline fill and storage tank bottom stocks, Cushing is left with a mere 10 MMbbls of transportable crude, with 75% of the oil hub’s storage capacity staying empty.

- Cushing oil inventories have declined for 12 out of the last 13 weeks, with seven weeks of consecutive declines, triggering fears that any further declines would debilitate pipeline transportation.

- The steepest backwardation in 2023 so far disincentivizes storage, and refinery maintenance might be Cushing’s best hope to rebuild stocks as up to 1.8 million b/d of US capacity will be going offline by mid-October.

2. Europe’s Gas Inventories “Comfortable” Before Winter

- Unprecedentedly high levels of gas inventories across the European Union, currently 95% full, combined with higher renewable generation and lower demand make Europe’s gas outlook for the winter more comfortable than last year.

- Analysts don’t expect another spike in gas prices akin to the €343 per MWh seen last August, but gas markets remain tight on the physical side and could be easily disrupted by supply shocks.


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