Russia’s continued curtailment of pure gasoline flows to Europe has pushed worldwide costs to painful new highs, disrupted commerce flows and led to extreme gas shortages in some rising and growing economies, with the market tightening forward. proceed till 2023, in keeping with the newest IEA report. quarterly Fuel market report.
International pure gasoline markets have been tightening since 2021 and international gasoline consumption is anticipated to say no by 0.8% in 2022 resulting from a report contraction of 10% in Europe and flat demand within the Asia-Pacific area. International gasoline consumption is anticipated to develop by solely 0.4% subsequent yr, however the outlook is topic to a excessive stage of uncertainty, significantly relating to Russia’s future actions and the financial impacts of excessive costs. Vitality.
Russia has largely lower off gasoline provides to Europe in retaliation for sanctions imposed on it following its invasion of Ukraine. This has added to the tensions and uncertainty within the markets as we strategy subsequent winter, not just for Europe but additionally for all markets that rely on the identical liquefied pure gasoline (LNG) provide pool.
“Russia’s invasion of Ukraine and the extreme reductions in pure gasoline provides to Europe are inflicting vital hurt to shoppers, companies and whole economies, not solely in Europe, but additionally within the rising and growing economies,” mentioned Keisuke Sadamori, IEA Director of Vitality Markets and Safety. “The outlook for gasoline markets stays clouded, particularly resulting from Russia’s reckless and unpredictable conduct, which has undermined its repute as a dependable provider. However all indicators level to markets remaining very tight by 2023.”
The present gasoline disaster additionally casts longer-term uncertainty on the outlook for pure gasoline, significantly in growing markets the place its use is anticipated to extend at the very least within the medium time period, because it has changed different stronger fossil fuels. emissions.
Pure gasoline costs in Europe and spot LNG costs in Asia reached report highs within the third quarter of 2022. This decreased demand for gasoline and prompted a change to different fuels equivalent to coal and oil for the manufacturing of electrical energy. In some rising and growing economies, value spikes have prompted energy shortages and blackouts. Fuel consumption in Europe fell by greater than 10% within the first eight months of this yr in comparison with the identical interval in 2021, resulting from a 15% drop within the industrial sector, as factories decreased their manufacturing.
Pure gasoline demand in China and Japan remained nearly unchanged over the identical interval, whereas it contracted in India and Korea. Chinese language gasoline demand is anticipated to rise lower than 2% this yr, its lowest annual progress price because the early Nineteen Nineties. In the meantime, U.S. pure gasoline costs have hit report highs. been since 2008, however North America has been one of many few areas on the earth the place demand has elevated, supported by demand for electrical energy era.
Europe has made up for sharp declines in Russian gasoline provide with LNG imports, in addition to different pipeline provides from Norway and elsewhere. Rising demand for LNG in Europe – up 65% within the first eight months of 2022 in comparison with the earlier yr – has diverted provide from conventional consumers within the Asia-Pacific area, the place demand has fallen by 7% over the identical interval resulting from decrease costs, delicate climate and continued Covid lockdowns in China.
The IEA predicts that European LNG imports will improve by greater than 60 billion cubic meters (bcm) this yr, greater than twice the world’s LNG export capability, which is able to preserve worldwide LNG commerce underneath extreme stress. within the brief and medium time period. This means that LNG imports from Asia will stay decrease than final yr for the remainder of 2022. Nevertheless, LNG imports from China might improve subsequent yr as a part of a sequence of recent contracts concluded because the starting of 2021, whereas a colder than common winter results in further demand from Northeast Asia, additional aggravating the market tightness.
Along with the diversification of provide, the European Union and its Member States have taken different measures to extend gasoline safety, equivalent to setting minimal storage obligations and implementing cost-saving measures. vitality for the approaching winter. EU storage services had been practically 90% full on the finish of September, though the shortage of Russian provides is presenting challenges to fill them subsequent yr. Japan and Korea have insurance policies in place to cut back reliance on imported LNG for energy era and have developed contingency plans for potential LNG provide disruptions.
For the brand new report, the IEA carried out an evaluation of the resilience of the EU gasoline market within the occasion of a whole shutdown of Russian provide from November 1, 2022. The evaluation reveals that with out discount of demand in place and if provide from the Russian gasoline pipeline is totally lower off, the EU gasoline storage could be lower than 20% full in February, assuming a excessive stage of LNG provide – and at practically 5 %, assuming low LNG provide. The drop in storage at these ranges would improve the chance of a provide disruption within the occasion of a late chilly snap. A discount in EU gasoline demand throughout the winter interval of 9% in comparison with the common stage of the final 5 years could be obligatory to keep up gasoline storage ranges above 25% within the occasion of a drop in LNG. And a discount in demand of 13% in comparison with the 5-year common could be obligatory throughout the winter interval to keep up storage ranges above 33% within the occasion of low LNG provides. Due to this fact, gasoline saving measures can be essential to reduce storage drawdowns and keep inventories at ample ranges till the top of the heating season.