If Q2 2021 European gas market can be accompanied by a soundtrack, it will definitely be ‘Right Here, Right Now’ by Fatboy Slim. The name of that song accurately describes the dynamism of things taking place since the very beginning of this year’s gas summer.
Following the reversal in injections into the gas storages, Europe is already experiencing lower production from the NCS. Norwegian maintenance, that has started during the second ten days of April, represents the first significant decline in gas supplies to NWE since January, when players lost access to LNG amid soaring Asian premium and vessel shortages.
Over a period of two and a half months, the regional market is expected to be short 4.9 bcm of supplies from Norway, most of which fell between April and May. Q2 daily gas exports from the country are expected to be constrained by 18% on average as compared to the levels seen in late March.
2021 Norwegian outages are developing according to their usual timing, in contrast to last year. In 2020, the works on the fields and processing plants were postponed until Q3 due to Covid restrictions, thereby extending a series of outages initiated by the planned shutdowns of Nord Stream and Yamal pipelines. It assisted in clearing a part of oversupply, laying a foundation for the subsequent growth in prices.
What influence Norwegian maintenance will have on the market environment this time? This is not a simple question, given the need for filling up storages on the one hand and favourable conditions for Europe-bound LNG deliveries on the other. As of now, the most that can be said is that the longer UGSs do not go into injection mode, the stronger will be the effect of Norway’s lower supplies throughout this quarter.
The opinions expressed in this blog are mine only and do not reflect the views of my employer.
For a look at all of today’s economic events, check out our economic calendar.