BAKU, Azerbaijan, Sept.28
By Leman Zeynalova – Trend:
Alongside the decline in European production (-12.5 bcm) and pipeline imports (-9.1 bcm), Europe’s LNG imports also declined by 7.8 bcm in January-August 2021, compared to the same period in 2019, Trend reports with reference to Oxford Institute of Energy Studies (OIES).
“This was primarily due to LNG cargoes being pulled away from Europe to the premium Asian market, as the global LNG market tightened substantially. Taken together, this amounted to an overall decline of 29.4 bcm in supply to the European market. However, calculated European gas demand in January-August 2021 (316.8 bcm) was actually 1.0 bcm higher than in the same period in 2019. Therefore, the ‘gap’ between 2019 and 2021 that needed to be filled was 30.4 bcm. This gap was met by the swing in storage injections and withdrawals. In January-August 2019, net storage injections amounted to 23.1 bcm,” said OIES.
In other words, according to the OIES report, the injections between April and August amounted to 23.1 bcm more than the net withdrawals between January and March.
“The actual net injections in April-August 2019 amounted to 53 bcm, and a further 7 bcm was injected in September-October, taking total summer injections to 60 bcm. By contrast, in 2021, the net withdrawal in JanuaryAugust amounted to 7.4 bcm: 47.2 bcm of net withdrawals in January-April were followed by 39.8 bcm of injections in May-August. Therefore, the swing in storage from a net injection of 23.1 bcm in 2019 to a net withdrawal of 7.4 bcm in 2021 amounts to 30.5 bcm – pretty much the same as the decline in production and imports, while demand remained relatively constant,” the report says.
Therefore, if European LNG imports in 2019 was Europe ‘picking up leftovers no-one else wants’, then in 2021 those LNG imports were attempts to feed rising demand, including the need to refill storage from a low level, according to the Institute.
“As such, the price of those LNG cargoes – as the ‘marginal molecule’ – had a definite impact on European hub prices. As European hub prices rose in an attempt to attract those LNG cargoes, spot buyers elsewhere in the world were obliged to pay an ever-greater premium in order to secure their cargoes. As discussed earlier, for LNG importing markets without domestic production, alternative pipeline supplies, and/or substantial storage, it became a case of ‘who wants it more’”.
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