The world gas market is moving into surplus after a long period of shortage
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The world market is overflowing with natural gas, which leads to lower prices and the creation of a surplus of fuel in both Europe and Asia – storage facilities for the winter may fill up ahead of schedule.
He writes about it Bloomberg.
Such a trend was a rare phenomenon during the last year, because Europe was in a hurry to secure as many alternative sources of supply as possible instead of supplies from the Russian Federation.
Countries are now filling up storage for next winter, a result of mostly mild weather this year and efforts to cut consumption. Tankers filled with liquefied natural gas now often spend weeks at sea trying to find buyers.
Demand for gas typically declines as the heating season ends, before hot weather raises cooling needs later in the summer. Then the fuel mostly goes into storage to prepare for the next season, but this year the filling of storage in Europe could end as early as the end of August, according to Morgan Stanley.
All attention is focused on summer weather, as any extreme heat and drought can lead to increased consumption. At the beginning of the third quarter, importers will start preparing for winter, which will lead to increased competition for LNG cargoes.
But for now, the surplus is growing: for example, in Spain, home to the largest number of LNG terminals in Europe, gas storage is already 85% full, which means that the country’s market could quickly turn into a surplus.
Meanwhile, global LNG exports rebounded to an all-time high in March, thanks in part to a recovery in U.S. production. An additional offer contributes to lower prices.
UK gas exports to the continent are on the rise as the country lacks large storage facilities and LNG continues to flow in at a record pace for this time of year. In addition, China is seeing record re-exports of LNG amid a slow recovery from the lifting of pandemic restrictions.
However, the planned annual maintenance of gas facilities from the end of April to the summer may change the situation. There are other risks associated with a further reduction in Russian supplies or unexpected interruptions. Global LNG supplies are expected to remain tight for another two years.
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