Europe Enters Winter With Its Lowest Gas Inventory of the 2020s

Asian spot LNG is trading above $30 per million British thermal units and Europe is entering winter with its lowest gas inventory of the 2020s, yet Rystad Energy stops short of predicting a further rally. In its winter LNG outlook, published this week, the consultancy lays out as many ways for prices to fall as to rise and tells buyers to plan for a wide range of outcomes instead of one base case.EU storage sites were 71.6% full in Gas Infrastructure Europe’s Nov. 11 update, with Germany at 58%, and that is well under the five-year average for the start of the heating season. The International Energy Agency modeled a cold winter combined with continued disruption in the Strait of Hormuz and found that EU storage could fall below 10% of working capacity by the end of March, S&P Global reported. A late cold snap would land when withdrawal rates, which slow as sites empty, are least able to respond.Rystad says Europe will have to pay up to keep US cargoes from being pulled toward Asia, where the loss of Middle Eastern supply has buyers chasing the same Atlantic LNG. Asia is a less eager bidder than the price suggests, though. Rystad expects a mild winter in Northeast Asia, where LNG at $30 discourages gas burning and boosts coal use. Weather alone may matter less than it sounds. Bernstein calculated that a super El Niño would cut Japan’s winter heating demand by 19% but its LNG consumption by only 2%.Price does more of the work. Bloomberg reported Monday that cheap domestic supply is curbing Chinese spot buying, with the national average LNG price near $22, almost $10 below the Japan/Korea Marker.In the US, the Energy Information Administration’s Nov. 10 outlook has Henry Hub averaging $2.87 from November through March, 16% below last month’s forecast, with export terminals running near full capacity. Rystad expects a winter peak around $4, and both describe a US market cut off from the global rally.October was both the busiest month for LNG tankers leaving Hormuz since February and the worst for attacks on shipping since the war began. S&P Global Energy tracking cited by Reuters counted 31 laden LNG tankers exiting the strait, up from 23 in September, while the Washington Institute for Near East Policy counted 37 ships struck over the same month.Kpler data put Qatar’s October exports just above 2.7 million tons, against nearly 6.2 million in February. QatarEnergy said in March that Iranian attacks had cut 17% of its export capacity and has since extended force majeure through at least the end of December.Supply from outside the Gulf has made up about two-thirds of the lost Qatari and UAE volumes since March, the IEA said, yet global LNG supply is still headed for a 3% drop this year, the steepest on record.Transits stabilized in October, according to Rystad, and could allow a supply recovery by the second quarter of 2027, but output is “one escalation away from cratering again.” Diplomacy offers little to lean on. Iran’s top security official, Mohsen Rezaei, has denied that talks with Washington are under way and said Tehran will not let enriched nuclear material leave the country, while Washington insists nuclear concessions be part of any deal. European gas has risen three sessions running, with front-month TTF up 2% to €88.42 per megawatt-hour on Thursday morning.On the upside, Rystad points to a cold snap in under-stocked Europe and an El Niño drought that would hit hydropower in Colombia and Brazil and lift regional gas demand. On the downside are the return of Middle Eastern LNG and mild weather in Europe and Asia.A Gulf recovery by spring would help this winter’s math, though the IEA takes a gloomier view of the longer run. It puts cumulative LNG supply losses from 2026 to 2030 at 150 billion cubic meters, equal to 15% of the new supply expected globally over that period, and sees no meaningful relief before the end of the decade.By Michael Kern for Oilprice.comMore Top Reads From Oilprice.comEU Imports of Russian LNG Top 2025 Value Ahead of January BanUK Vows Global Climate Leadership as PM Doubles Down on Net ZeroCentral Asia’s B20 Message to Washington: Let’s Make Deals