With the plunge in Russian pipeline gas deliveries, Europe will need "huge volumes" of LNG next year, commodity trader Trafigura said on Thursday, adding it expects continued volatility in the natural gas and LNG markets.
"Looking forward, we expect gas and LNG markets to remain volatile," Trafigura said in its annual report for the year to September 30, in which one of the world's largest independent commodity traders posted a record-high net profit of $7 billion.
"While Europe should avoid a blackout this winter by drawing on inventories and cutting demand, it will need to import huge volumes of LNG in 2023 given the massive reduction in flows from Russia," Trafigura said in an overview of its performance and outlook for the near term.
Natural gas prices in Europe will have to remain elevated so that the continent can continue to attract most of the LNG cargoes in competition with the other key demand centers, according to Trafigura.
The commodity trader expects Europe to continue to prioritize the security of supply "through next winter and beyond."
The United States has been shipping record volumes of LNG to Europe this year to help EU allies. A total of 72% of all U.S. LNG cargoes were headed to Europe in November, according to estimates cited by Reuters.
However, the significant drop in Russian gas supply this year occurred only in June, meaning that Europe could still stock up on some Russian gas earlier this year.
Ahead of the winter of 2023/2024, the gap in gas supply in Europe will be much wider without Russian gas. Europe will not be importing much Russian gas-or none at all if Russia cuts off deliveries via the one link left operational via Ukraine and via TurkStream-compared to relatively stable imports from Russia in the first half of this year, before Moscow started gradually cutting volumes via Nord Stream in June until shutting down the pipeline in early September.
By Charles Kennedy for Oilprice.com
More Top Reads From Oilprice.com:
Charles is a writer for Oilprice.com More