BAKU, Azerbaijan, Oct.21
By Leman Zeynalova – Trend:
The question of whether current gas stocks in Europe will be sufficient can be answered in terms of likely storage withdrawals in the coming winter, Trend reports with reference to the Oxford Institute of Energy Studies (OIES).
“The especially cold winters of 2017/18 and 2020/21, when storage withdrawals were motivated by both higher European demand and reduced LNG supply, saw full-winter withdrawals of 70-72 bcm. The coming winter would have experience either a dramatic interruption in supply or an equally dramatic surge in demand (most likely weather-related) to see a call on storage substantially greater than in 2017/18 or 2020/21. Given that the coming winter is unlikely to be significantly colder than either of those two winters, a greater call on storage would only be caused by a truly exceptional reduction in supply availability to Europe, associated with LNG cargoes again being pulled away from Europe, and/or possible supply disruptions,” reads the OIES report.
Therefore, OIES believes that Europe already (just about) has the stocks it would need to get through a winter of strong withdrawals in the region of 70-72 bcm.
“Given that European stocks tend to peak in the last week of October, there are probably another 10 days of injections that could see European stocks rise from 79.8 bcm on 12 October to almost 82 bcm by the final days of October. If the winter of 2021/22 were to be cold and see a call on storage of 70-72 bcm, the stocks would be sufficient but there would be a highly significant impact on the following summer, given the need to replenish storage stocks that had been drawn down to minimal levels. This would surely support higher European prices through the summer of 2022. For comparison, the lowest stock level in recent years was 18 bcm at the end of March 2018, in the aftermath of the ‘Beast from the East’, while the summer of 2018 saw robust prices as storage stocks were replenished. If the coming winter does indeed prove cold and with a strong degree of both market tightness and storage drawdown, the impact on summer 2022 could mean that the current crisis unfortunately becomes ‘the gift that keeps on giving’.”
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