Europe | Natural Gas: Toward Winter 2024

The gas situation in Europe remains favorable thanks to contained demand and stable supply, resulting in gas prices at pre-war levels. We expect no gas shortages in the coming winter, although additional measures will be necessary to have a sustainable gas balance.

Key points

• Key points:
• European natural gas storage remains at favorable levels (63% capacity, +26% YTD over the 2018-21 avg.) to face the end of winter, thanks to a gas demand that remained well contained (16% YTD below the same average) due to warmer-than-normal weather and high wind power generation.
• On the supply side, the remaining gas flows from Russia continued: monthly pipeline transit of 0.8 bcm from Ukraine and Turkstream pipelines each, and monthly LNG imports from Russia of 2 bcm. Norwegian pipeline flows remained at their 5-year average, while Algerian flows weakened. Although LNG imports declined in January, the ones from the US and Norway continue at high levels.
• These contained demand and stable supply are driving down European gas prices, which are likely to remain relatively low as the current warm weather is expected to last until the end of the winter. However, prices could come under pressure again in the winter of 2024 if the recovery in LNG imports from China is very strong.
• According to our (conservative) scenario, we continue to expect no gas shortages in either 2023 or 2024. In 2023, reserves would fall to 55 bcm at the end of the winter, as compared to the European Commission target of 50-60 bcm. But in the winter of 2024 gas storage would be below those targets and additional measures may be needed to maintain safe levels.
• Finally, we incorporate an analysis on gas consumption savings in the EU in 2022, where we see that high gas prices have impacted industry gas consumption; and an analysis on the LNG market, where we estimate that global supply would be sufficient to cover the increase in global demand based on a higher world export capacity in 2023.

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