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Natural gas futures in Europe plunge 15% today, down 84% from Crazy Spike

Surplus of LNG in China, suddenly?

Through Wolf Richter to WOLF STREET.

The price of Dutch first-month TTF natural gas futures – a benchmark for northwestern Europe – plunged 15% today to €54.85 per megawatt-hour (MWh), and has now crashed 84% from the insane peak of summer 2022. The price has now returned to its original level in early September 2021 (data via Investing.com):

What spooked the European natural gas market today into the 15% selloff was reports that Chinese LNG importers were trying to divert February and March LNG shipments from China to Europe, as they sat on large LNG inventories amid falling prices in China. .

There were fears that the reopening of the Chinese economy would put additional pressure on global LNG markets. Or was it just hype again?

In 2022 and 2023, several factors came together to avert what had been seen as a potentially terrible energy crisis:

  • Increase in LNG supply from the United States and other places in the world.
  • Rapid deployment of floating storage and regasification units (FSRUs) in Europe to offload this LNG supply, including in Germany.
  • Natural gas shipped from Norway to the rest of Europe grew by 4% year-on-year in 2022, or 113 billion cubic meters (Bcm), according to S&P Global. Norway is today Europe’s leading supplier. Norwegian gas deliveries to Germany have reached historic highs.
  • A large-scale effort by households and businesses, particularly in Germany, to reduce natural gas consumption (heating, hot water), also motivated by sharp increases in the price of natural gas.
  • A shift in power generation from natural gas to other energy sources, including coal, also driven by sharp increases in natural gas prices through the summer of 2022.
  • A warm winter.

All this has contributed to reducing the demand for natural gas and increasing the supply to replace the Russian gas pipeline.

Natural gas storage facilities in Europe are in exceptionally good condition for this time of year. Across the European Union, storage facilities were 81.7% full as of January 14, according to EIG (Gas Infrastructures Europe). Here’s how the 916 terawatt hours (TWh) of natural gas in storage on January 14 compares to levels at the same time of year in previous years:

  • 76% above 2022
  • 32% above 2021
  • 1% above 2020
  • 30% above 2019
  • 44% above 2018

Storage levels differed by country, but all were in great shape, notably in Germany, which managed to increase its storage levels in recent weeks during a (winter) period that would normally be the withdrawal period. As of January 14, by GIE:

  • Germany: 90.5% full
  • France: 79.7% full
  • Italy: 79.3% full
  • Spain: 93.6% full
  • Netherlands: 75.8% full
  • Poland: 95.6% full
  • Sweden: 88.4% full
  • Belgium: 88.6% full
  • Austria: 87.3% full
  • Denmark: 91.5% full

In terms of LNG prices, the pressure has also eased. The price of the Japan Korea Marker (JKM) futures contract, at $26.80 per million Btu, plunged 62% from the insane peak on Aug. 31, 2022 (data via Investing.com):

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