$2 gas in Europe is here: who will blink first?
In October last year the Oxford Institute for Energy Studies (OIES) published an Energy Comment which considered the possibility of $2 gas in Europe during 2020. Remarkably we now have $2 gas before the winter has ended. The month ahead index for March for TTF is $2.91 per MMBtu and for NBP was $2.88 per MMBtu. The mild winter in the northern hemisphere and the Ukraine transit deal were key factors in reducing prices but the impact of the coronavirus on the LNG market has been the catalyst to bring forward $2 gas in Europe. With LNG export capacity continuing to grow, can this supply be absorbed by LNG import growth in Asia and how much can Europe absorb with gas in storage well above 2019 levels. A serious supply overhang is possible in Europe this summer, and if this happens, who will blink first – Russia, Norway or the LNG suppliers – and/or might prices fall so low as to encourage lignite to gas switching?