The European Union has spent most of this year importing natural gas from any source available, including sanctioned Russia, after it sanctioned it and began preparing for the time when Russia will turn off the gas tap, which it did, on Nord Stream 1, at least, in the summer. The media have spent that time citing politicians, businesspeople, and commentators and fueling fears that winter in Europe this year will likely be harsh, however much gas there’s in storage. But it seems there’s plenty of gas in storage. If only that were enough for comfort
Earlier this month, Reuters’ John Kemp wrote in a column that Europe had completed a record-long gas storage refill season, saying storage inputs likely peaked around mid-November.
The longest and largest refill season on record, he wrote, was probably over, but over its length, European countries had managed to stock up well on natural gas ahead of winter.
That was certainly good news, especially coupled with a mild October and much of November, which meant naturally lower consumption rather than attempts to mandate lower consumption.
This week, Kemp wrote another column that cited data showing it pretty likely that Europe might end up coming out of winter with some gas still left in storage—quite a bit of it, in fact. But there are conditions.
The mild weather that was a big reason why Europe has the levels of gas in storage it does at this time of year will also be a big reason for Kemp’s forecast to materialize. The problem with the weather is that even if the European winter is mild, it cannot be mild enough in December and January to prompt the same energy consumption in October.
Simply put, it’s never as warm in January as it can sometimes be in October. And this means that demand for heating energy will inevitably increase next month and the month after. And this will mean higher gas consumption in countries that rely on it for heating purposes. And this, in turn, will mean storage drawdowns.
Yet, with record levels of gas in storage, this should not be a cause for worry, although it seems to be for some German officials. The head of the country’s energy regulator, Klasu Mueller, for instance, warned in early October—when a cold spell pushed energy consumption higher—that “We will hardly be able to avoid a gas emergency in winter without at least 20% savings in the private, commercial and industrial sectors.”
“The situation can become very serious if we do not significantly reduce our gas consumption,” he also said, even though Germany was at the time filling up its gas storage facilities steadily and discussing with its fellow EU members emergency measures such as joint gas buying and gas sharing.
Then, in November, Reuters quoted Mueller as saying that Germany’s gas storage could empty in a matter of days if the weather gets very cold. “Just a few freezing cold days are enough for a dramatic increase in gas consumption,” he said. When he said it, gas storage levels in Germany had reached 99.3 percent.
Indeed, everyone who has spent any amount of time in a temperate climate during the winter knows that when it’s cold, few would have the strength of character to freeze instead of turning up the thermostat.
According to Kemp, high prices will be a natural deterrent for gas consumption but, again, when people are cold, the one thing they can think about is getting warm, not what the price of gas is. It’s either that or a lot of people with cold-related health problems all at once.
A lower consumption is also among the factors that Reuters’ market analyst notes as necessary for Europe to end winter with a decent level of gas in its storage caverns. So, the natural deterrent of high prices will not be enough to keep consumption low, and that is, as noted above, to be expected.
The other condition Kemp sees as necessary for Europe’s gas storage comfort in three months is the continued flow of Russian gas via Ukraine. It seems despite its best efforts, Europe still very much relies on Russian gas.
By Irina Slav for Oilprice.com
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