By Irina Slav
Earlier this month the analysts dreamed of The alarm for European natural gas prices when it turned out that many Asian buyers are rejecting LNG loads and Europe is taking these, filling up its storage space. Now, everyone seems to wonder when prices will hit bottom, if they will hit bottom.
The gas is in a bear market at the moment. In Europe, the reference point has lost 27 percent since the beginning of the year after losing about 50 percent last year, Vanessa Dezem and Will Mathis of Bloomberg wrote earlier this week. When reporting on the E-World event in Germany, they also cited traders and analysts saying they would not venture to guess how low prices could fall further. This could be a worrying sign.
Natural gas production has increased worldwide. It's not just the United States, although the US UU. He leads the charge with his cheap fracked gas, but it is also Australia, Israel, Russia and Norway, among others. Now more gas is offered, but demand is stuttering. The coronavirus is the immediate culprit: it affects China's energy demand and what affects China's energy demand also affects global demand.
Related to the coronavirus, but a separate concern is the slowdown in the global economy. Initially attributed to the trade war between the United States and China, now expectations of slower economic growth worldwide have persisted despite the Phase 1 agreement that Washington and Beijing signed at the end of last year. Quarantines are ending and people in China are returning to work, so the effect of the coronavirus on GDP will eventually disappear, but optimism is difficult to achieve.
However, the economic sentiment is not too big in Europe either and it has been for a while. The eurozone economy, which brings together some of Europe's largest gas consumers, especially Germany, has been stumbling for years and nothing seems to help it grow stronger. Germany itself registered a technical recession last year and during the last three months of that year registered zero economic growth. That does not lead to a bullish feeling about any energy product, let alone excessive gas supply.
And that's not all. Gizmodo recently reprimanded the continent for committing $ 130 billion in investments in new gas import infrastructure that will increase its consumption of the product by approximately 30 percent. That is bad for Europe's emission targets and people in Brussels seem to know.
Earlier this month, Euractiv reported that the European Commission was preparing a strategy to curb methane emissions generated by the oil and gas industry, including methane generated during the production of natural gas in the United States that is then liquefied and sent to Europe.
"Work has begun on methane emissions linked to the energy sector, including the production and transportation of oil and gas, but also in coal mines and we are planning to present the strategic plan even this year," said an official from the EU in drafting the strategy. He told the news portal.
It is probably too early to start worrying about the effect of this strategy on gas demand in the continent that has the ambition to become the first zero-emission country in the world by 2050. However, with such a strong environmental lobby like that of Europe, it might not be too. early.
Europe is currently between the rock of rising energy demand and the difficult place of emissions-related commitments. And as it stretches between these, it is drowning in gas that is becoming increasingly cheap. How cheap could it be? Possibly cheap enough to make Norway close the taps: an Equinor executive sent this message to those concerned about the gas problem in Europe:
"If someone expects relief from supply from Norway, we will have to disappoint him," senior vice president Tor Martin Anfinnsen told Bloomberg. “We will be the last to close the taps. We are far from reducing flows. ”
By Irina Slav for Oilichelin