Europe has failed to win enough long-term contracts for liquefied natural gas to offset the cut in Russian gas imports, which may prove costly next winter as a rebound in Chinese demand could severely restrict the market, according to a new analysis this week from Reuters.
Europe imported 121 million metric tons of LNG last year ahead of the 2022-23 winter season to replace Russian gas, up 60% from the previous year, to help the continent winter through gas storage levels. higher than expected.
But Europe bought much of its LNG last year on the spot market, where prices are typically much higher than gas bought under long-term contracts, and analysts warn that additional demand from China could push prices higher. go up even higher. Reuters reports.
Analysts estimate that Europe accounted for more than a third of total global spot market trading in 2022, up from 13% in 2021, and this exposure could potentially increase to more than 50% during the 2023-24 winter season.
Part of the problem is that the European Union sees gas as a transition fuel, so its LNG buyers are struggling to commit to the time frames needed to get cheaper LNG under contract, while Asia has been buying new long-term contracts. from 2025. and beyond.
“As the green lobby in Europe has mistakenly managed to persuade politicians that hydrogen can largely replace natural gas as an energy carrier by 2030, Europe has become too reliant on short-term, one-off purchases of LNG.” said consultant Morten Frisch. Reuters.
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Natural gas prices in the US have continued to decline, down another 9% over the past week to nearly $2/MMBtu.