Europe Well Supplied Into Summer But Upside Risk for Winter

Europe is currently very well supplied with gas at least into summer but high market volatility is expected according to Timera Energy.

• Healthy supplies are driven by unusually low storage injection demand given high starting inventories reflecting reduced storage flex, and structural demand losses with a delayed industrial demand response.
• The most important source of price response is the diversion of flexible LNG cargoes to Asian buyers as well as the remaining power sector switching, further demand response from industrial buyers and injection demand from fast cycle storage facilities.
• Seasonal storage demand and power sector switching are relatively elastic and responsive but much larger price swings are required to clear the market.
• They see an upside risk this winter if Europe is forced into an LNG bidding war with Asia due to a period of cold weather combined with the missing Russian flows.