REPowerEU and the Short-Term Outlook for the European Gas Market
The May 18 documents from the EU (REPowerEU) suggested that Russia pipe imports to the EU could fall by 70 bcm this year. With Nordstream flows being at 40 percent of capacity ostensibly due to compressor issues, a 70 bcm reduction looks to be a possible outcome if flows don’t recover after the annual Nordstream maintenance this month. A few months ago this would have spelt disaster for the European gas market, but gas demand in Europe is already down 11 percent this year and further declines are expected. Europe is also able to attract a lot of LNG from Asia, with China demand being down sharply this year. If LNG supply keeps up – despite the Freeport issues – then with a mild winter, Europe might just be able to muddle through with storage filling to 80 percent and with no rationing of gas – high prices have done much of the work in reducing gas demand. 2023 could be problematic though if Asia demand picks up, especially in China, making it much harder for Europe to attract additional LNG cargoes.