Long-term gas shortage has been replaced by its surplus

The world market is literally flooded with natural gas, creating a surplus of it in Europe and Asia, and lowering prices.

Bloomberg writesthat in such a situation, storage facilities for the winter can be filled earlier than planned. This trend has been a rare occurrence over the past year as Europe rushed to secure as many alternative sources of supply as possible instead of Russian ones.

Countries have now begun filling up storage for next winter, taking advantage of this year’s mild weather and efforts to reduce consumption. LNG-filled tankers now spend weeks at sea trying to find buyers for their cargo.

As a rule, the demand for gas decreases with the end of the heating season and until the hot weather again increases the demand for cooling. Then the fuel mainly goes to the storage facilities to prepare for the winter. However, this year, according to Morgan Stanley, the filling of European storage facilities may be completed by the end of August.

Although this will also depend on the summer weather – extreme heat and drought can lead to an increase in consumption. At the beginning of the third quarter, importers will begin to prepare for winter, which will lead to increased competition for LNG cargoes.

And while the surplus is increasing. In Spain, which has the most LNG terminals in Europe, gas storage facilities are already 85% full, which means that the country’s market can quickly turn into a surplus.

Global LNG exports recovered to an all-time high in March, thanks in part to a recovery in US production. The additional offer contributes to lower prices.

UK gas exports to the continent are on the rise as the country lacks large storage facilities and LNG continues to flow at a record pace for this time of year. China sees record LNG re-exports amid a slow recovery following the lifting of pandemic restrictions.

The planned annual maintenance of gas facilities from late April to summer can change the situation. There are still other risks associated with further reductions in Russian supplies or unexpected disruptions. Global LNG supplies are expected to remain limited for another two years.

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