What goes up not necessarily must, but sometimes does, come down... Nautural Gas Futures in EU Decreased 44% since 26 August 2022.
NATURAL GAS FUTURES (EURO/MWH): JANUARY 2021-12 SEPTEMBER 2022
Source: ICE Dutch TTF Board
The late August spike in futures prices was driven by speculation following Russia’s threats to cut, and then by its actual cuts, of gas deliveries to Europe. However, the threat imposed by those high prices caused large shifts, not only lowering demand but also lining up new supply, which may well have left a lot of prominent energy speculators and assorted hedge funds on the wrong side owing to massively leveraged positions.
Concomitant with the decreased demand for natural gas are the two floating LNG import and storage terminals (i.e., the EemsEnergy terminals) that commenced operations on Thursday (8 September) in the port of Eemshaven (Netherlands), at which time they received their first shipment of LNG from the United States.
The EemsEnergy terminals, known as floating storage and regasification units (FSRU), receive LNG, store it, re-gasify it, and then send it, via pipeline, to the EU's land-based distribution network (also in the Netherlands) from which LNG is distributed to other countries.
Germany, the largest consumer of LNG in the EU and the state that was most dependent on Russian-sourced LNG, has installed five FSRUs, three of which have gone into operation, with two more to follow in November.
All in all, LNG storage facilities are at or nearly at capacity as of 12 September 2022 in all 27 member states of the European Union.
Long(er) term condiderations? My 2 (euro) cents:
Russia has not been able to shift all of the LNG it did not send to the EU as the pipeline system cannot be moved easily and there are no LNG export facilities linked to the (current) production sites. This has forced Russia to cut production at these sites, and thus lose the revenues from these facilities. Russia will be obliged to accept EU-imposed price caps and will renew delivery of LNG to the EU by Q1 2023.
