Oxford Energy Podcast – A Series of Unfortunate Events: Supply-side factors in the European gas price rally in 2021 and outlook for the rest of winter

In this podcast, David Ledesma talks to Jack Sharples about his recent paper on the supply-side factors behind the 2021 gas price rally in Europe, and the supply-side outlook for the rest of winter 2021/22. The ongoing decline in European gas production was exacerbated in 2021 by temporary maintenance-related declines in the UK and Denmark, while the rebound in 2022 will be limited. Pipeline supplies from Norway, Algeria, and Azerbaijan were higher year-on-year. Conversely, physical flows from Russia were virtually flat year-on-year, and down sharply from 2017-2019 levels. Global LNG supply grew year-on-year, but that growth was tempered by unplanned outages. Conversely LNG demand outside Europe grew strongly. As a result, LNG supplies to Europe were constrained compared to 2019 and 2020. To balance the market, substantial net withdrawals from storage were made in Q1 and Q4 2021, with slower than usual injections in Q2 and Q3, resulting in European storage stocks lower than usual at the end of the year. Overall, these supply-side constraints were key drivers of the 2021 gas price rally. Looking to Q1-2022, the combination of a modest supply-side outlook and lower than usual storage stocks will likely support prices at high levels through to the end of winter.


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