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Warm Winter in Europe Eases Natural Gas Restocking Concerns, but 2023 Still Looks Daunting
An unseasonably warm winter and ample LNG imports are dampening expectations for high volatility when European countries start restocking natural gas reserves this spring, but risk still abounds for a region facing a tight supply outlook for years to come.

Headed into winter, the market faced the possibility of harsh weather and China’s return to the liquefied natural gas spot market, but neither have materialized. The region built higher than average storage levels before the heating season began in October, but prices have only recently come down to levels last seen since before Russia invaded Ukraine as supply concerns ease.
As Europe experiences what could be one of the warmest winters on record, Kpler Inc.’s Eleni Papadopoulou, lead gas and LNG analyst, told NGI that fears of a severe supply crunch and rationing are becoming “somewhat subdued” thanks to a lifeline of “ample regional gas and LNG stocks.”
After a short cold snap in early December, the weather made an unseasonable shift, allowing some countries like Germany to make substantial injections to storage. By the end of December, Europe’s natural gas inventories were 32 billion cubic meters (Bcm) higher than the same time in 2021, according to Kpler.
Morgan Stanley analysts estimated this week that Europe could be on track to exit winter with gas storage levels around 50% full. That could mean storage levels on the continent would be twice as high as the same time last year and closer to the five-year average.
European storage was around 83% full, trending along the five-year high, after the first week of January, according to NGI calculations of data published by Gas Infrastructure Europe. Europe’s heating season typically begins in October and can last until March, when countries begin purchasing large volumes of natural gas to restock reserves.
“Price spikes due to prolonged and consistent market sentiment along with fundamentals seen in 2022 should in theory be reduced in 2023,” Papadopoulou said.
Ending the winter with healthy reserves could help temper prices as traders weigh Europe’s supply outlook against its ability to compete with China and other Asian LNG buyers for cargoes.
In a model conducted by the International Energy Agency (IEA) in December, Europe was expected to have a 27 Bcm supply gap after the heating season that would need to be filled by mostly U.S. LNG suppliers. Russian supplies that have since been cut almost completely helped to fill the continent’s inventories last year. The United States exported around 53 million tons of LNG to Europe last year, according to data from Kpler.
If China’s LNG demand growth is modest in 2023, Papadopoulou told NGI, Kpler expects the flow of additional volumes to be partially offset by potential import declines from Japan and South Korea, lowering the chances of spring price spikes.
“However, when looking at daily gas availability, there is an upside risk from the substantial annual decrease in Russian gas flows to Europe still leaving the market exposed to gas price volatility from multiple factors such as weather, and any unplanned infrastructure/supply issues,” Papadopoulou said.
Fundamentally Undersupplied
At the crux of Europe’s upside risk is the fact that it still faces a fundamentally tight natural gas market until at least 2024 when substantial additions of U.S. LNG capacity come online, Poten & Partners’ Jason Feer, global head of business intelligence, told NGI.
Feer said the firm estimated that Europe would continue to secure the majority of LNG cargoes for the next year, barring an economic recession. The trick, he added, will be repeating the endeavor without the benefit of relatively cheaper Russian pipeline gas.
“There is focus on how the region will get through this winter, and Europe has been good about making that resupply happen so far,” Feer said. “I think that’s part of the problem. The focus has been on ‘let’s not freeze to death this winter,’ and the next question is how to do it again and again for the next few years.”

The largest addition to U.S. export capacity isn’t expected for another two years. The first train of ExxonMobil and QatarEnergy’s Golden Pass LNG southeast of Houston could start up in 2024, with the second and third trains expected to follow in 2025.
Venture Global LNG Inc. is ramping up production at the Calcasieu Pass terminal in Louisiana. Its Plaquemines LNG facility could have half of its 18 modular trains ramp up starting in 2024. The other nine trains could enter service sometime in 2025.
In the meantime, Russian pipeline gas flows are down around 80% compared to the same period last year, the IEA estimated at the end of December.
Rice University’s Anna Mikulska, a nonresident fellow in energy studies at the Baker Institute for Public Policy, told NGI there is a chance Russia could further reduce volumes to influence market volatility at opportune times, although it has incentive to keep gas flowing as long as possible.
“Everything is possible and allowable in modern battle, and Russia has shown us it isn’t necessarily driven by economic or emotional rationality,” Mikulska said.
However, she added, “ it’s important to underscore it’s not the Europeans that aren’t taking Russian natural gas, it’s the Russians that aren’t sending it. Europe hasn’t found a way to displace its supply quickly, and that will remain a problem throughout the year.”
Most EU member countries now also have a legal requirement to reach storage levels of at least 90% by Nov. 1, which Mikulska said could keep European countries pushing up prices through the restocking season. Some countries, like Germany, have set more substantial benchmarks at 95%.
In a case study published by the Baker Institute in December, Mikulska and her co-authors posited that new storage requirements could increase market tightness throughout the year as governments limit the supply of natural gas for customers to inject into storage. It could also increase the need for gas rationing, especially in the summer.
“Because it is a mandate, price isn’t going to be the main concern,” she told NGI. “Over the summer, when demand is generally lower, we could see higher demand and increased competition with Asia.”
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