June 3, 2020 / 1:25 PM / a month ago

Record European gas stocks raise pressure for supply cuts

LONDON (Reuters) - European gas inventories are at record levels as weak demand has led to excess gas moving into storage, putting pressure on producers to cut supply.

A rise in global liquefied natural gas (LNG) supply due to sluggish demand in Asia, two warm winters and reduced industrial demand due to the coronavirus pandemic, have resulted in unusually high European stocks.

“Unless we see strong supply cuts there is a risk that storage in northwest Europe is full by the end of July or early of August,” said Marina Tsygankova, a gas analyst at Refinitiv.

For a graphic on European gas storage fill quickly in 2020:

here

For a graphic on European gas stock fullness at the end of May 2020:

here

Some countries, such as Belgium, already have stocks running at over 90%, while others including Germany, Austria, France and Slovakia, have storage levels above 70%.

Norwegian flows to Britain averaged at 319 gigawatt hours (GWh) per day in May, compared to 540 GWh per day in May 2019, Refintiv Eikon data showed. Exports to continental Europe were at around at 2,387 GWh per day last month, compared to 2,623 GWh per day in May 2019.

Russian supplies via three main lines averaged at 3,374 GWh per day in May 2020, a 21% drop compared to May 2019.

Russian flows via the Yamal-Europe pipeline through the Mallnow compressor station halted in late May as the transit agreement between Russia and Poland expired.

But on June 1, flows jumped and pipeline capacities for the third quarter are almost entirely booked up, traders said, much of it bought by Gazprom (GAZP.MM).

Gazprom has been quiet with offering spot, June and July volumes via its electronic trading platform in the past several days, several gas traders said, adding this may help to tighten the market.

For a graphic on Total monthly European gas imports:

here

LNG deliveries are expected to be lower in June as well as dozens of cargoes for loading in the United States have been cancelled for June and July.

“We now expect around 125 U.S. cargoes to be shut-in this summer, potentially slashing LNG deliveries to Europe by up to 12 bcm (billion cubic metres) compared to what was expected at the start of the summer,” consultancy Energy Aspects said.

Qatari deliveries are also expected to be reduced as higher prices in Asia mean it’s more profitable to send cargoes to India and northeast Asia, one LNG trader said.

Reporting by Ekaterina Kravtsova; editing by Nina Chestney and David Evans

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