EU Gas Tight After Rebalancing Oversupply in Q3: Rystad

The European gas market is looking to the downside in Q3 to balance the oversupply in the market with building storage levels and muted demand growth according to Rystad Energy. Balancing driven by increased demand in Europe and Asia LNG as well as reduction in gas and LNG supplies.

• Rystad expects LNG supplies throughout the summer reduced by maintenance and a normalisation of the LNG plant utilization rates. A more comprehensive shut-in would require prices below 6$/mmBtu for lower Egyptian supplies and below 5$/mmbtu to reduce US supplies. They see a very low probability of US LNG cargo cancellations with global benchmarks still well above shut-in pricing levels.
• Underlying fundamentals remain tight over the next 3 years with cold weather price risk into the winter while waiting for new LNG supplies to come online. They expect Europe and Asia will continue to compete for available LNG supplies.
• A cold winter could boost demand by up to 30bcm (6%-7% of total demand) compared to a mild winter and Europe needs to maintain demand reduction at 12% vs the five-year average.
• The market will remain volatile reacting to shocks such as a China LNG recovery, European industries, or unplanned LNG outages.