After several months of a remarkably tight European gas market, the situation is continuing to deteriorate as the autumn begins. Gas prices are reaching record highs, indicating serious difficulties over the next few months. Already, the current situation has been described as a “perfect storm” by several analysts, who point to (at least) ten causes of the current crisis.
Inventories would have normally been largely replenished during the summer. But that proved impossible this year, as gas demand has exploded all over the world, increasing competition between Europe and other regions. This year, the economic recovery is very strong in Asia, most of which has managed to bring the pandemic under control. This leap forward is causing an explosion in gas demand, with Asia and Europe increasingly competing to buy LNG on the spot market. LNG spot prices are about $21/MMBtu in Asia and $20/MMBtu in Europe. For its part, North America also sharply increased its gas consumption for power generation․
At the same time, almost everywhere (and especially in Asia), new LNG import terminals (or expansions of existing terminals) are coming into service. This illustrates that demand is returning to pre-pandemic levels. In several countries, these levels have even been exceeded. Finally, speculators have also played a role in the rise in gas prices, but this is said to be a temporary phenomenon, which will subside over the next few weeks․
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