The global natural gas market is entering this winter with potential for significant shifts.
The past two winters saw mild weather, keeping gas prices stable and inventories high.
This year, a combination of factors, including weather, operational risks, and geopolitical uncertainties, could disrupt this balance, according to EIA.
Key Factors to Watch:
Weather Impact: A colder-than-usual winter, influenced by a possible shift from El Niño to La Niña, could drive up heating demand in Europe, Asia, and the U.S. Models from the European Centre for Medium-Range Weather Forecasts predict colder conditions in Northwest and Central Europe, risking higher consumption and tighter supply.
LNG Supply Challenges: Limited new LNG capacity is coming online, primarily in the U.S., with projects like Corpus Christi LNG Stage 3 and Plaquemines LNG Phase 1 adding 1.7 billion cubic feet per day (Bcf/d). However, these projects will operate below nominal capacity during initial phases, and delays could further constrain supply.
Geopolitical Risks: The Russia-Ukraine pipeline contract, set to expire at the end of 2024, may reduce pipeline flows to Europe. Russian pipeline exports to the EU already declined by over 40% in 2022, averaging 1.2–1.4 Bcf/d in 2023–24. If these flows cease, Europe will need to rely more on LNG imports and storage withdrawals.
Regional Dynamics: Europe’s gas storage is 95% full as of October 31, 2024, offering a buffer. However, under a cold winter scenario, storage could drop to just 11% by the end of the heating season, according to the European Network of Transmission System Operators for Gas (ENTSOG). In Asia, China’s record LNG imports from August to October reflect strong storage builds, but a cold winter could drive spot market competition, as seen in the winter of 2017–18.
Current market trends:
Natural gas prices have declined significantly in 2024.
European TTF prices averaged $10.37/MMBtu from January to October, while East Asia’s JKM prices averaged $11.47/MMBtu.
These prices are more than 50% lower than in 2022 and over 20% lower than in 2023. Forward prices for this winter are around $15/MMBtu, reflecting stable expectations unless severe weather or supply disruptions occur.
This winter will test the resilience of global natural gas markets as regions compete for limited LNG. Weather, operational stability, and geopolitical developments will shape supply-demand balances, with potentially far-reaching consequences for industries and consumers.
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