Key points of this article:
- Russia has on EU Natural gas supply?
- Can the EU's natural gas storage ensure that Europe has survived the winter?
- html European natural gas futures prices soared 23% on September 5. Can Europeans still afford natural gas this winter?
- What measures will the EU take to reduce the impact of rising natural gas prices on production and life?
European gas futures prices surged 30% on Monday after Russia said its major natural gas supply pipeline to Europe, Nord Stream One, would be closed indefinitely, sparking concerns over EU gas shortages and gas rationing this winter.
9/5, Netherlands TTF October benchmark natural gas contract futures prices soared to 272 euros per megawatt-hour (MWh) and fell to 256 euros at the close, up 23% on the day,
Europe accused Russia of weaponizing energy supply in retaliation for Western sanctions on Moscow’s “invasion” Ukrainian . Russia said the West launched an economic war on , and sanctions hindered pipeline operations.
Without Russian natural gas, can Europe safely survive this winter?
. How much impact does Russia have on the EU’s natural gas supply?
Without Russian natural gas, whether Europe can survive the winter safely depends on how much natural gas from Russia accounts for in Europe's natural gas consumption. The opinion on the Internet believes that once Russia stops supplying natural gas to Europe, European natural gas prices will soar to 5,000 euros, and that Europeans will therefore have no money to spend the winter based on their inherent experience.
According to IEA data, the EU imported 155 billion cubic meters of natural gas from Russia in 2021, accounting for about 45% of the total imports of the EU and 40% of the total consumption of natural gas. The Nord Stream pipeline from Baltic Sea to Germany has historically supplied about one-third of the natural gas exported from Russia to Europe, which accounts for about 13% of Europe's natural gas consumption.
However, in the six months since the outbreak of the Russian-Ukrainian war, Europe has been rapidly reorganizing its natural gas supply channels just like reorganizing its oil supply channels. First of all, the Nordic Pipeline No. 1, which was engaged in the development, had only operated at 20% of its production capacity before the gas transmission was stopped last week, that is, the gas supply of Nordic Pipeline No. 1 accounted for only 2.6% of Europe's natural gas consumption in August.
The above chart is the proportion of gas purchase channels calculated based on gas supply sources in the EU's natural gas import volume in August 2022. In the fourth quarter of last year, the proportion of natural gas from Russia had dropped to only about 38% of EU purchases. By August, the proportion of natural gas from Russia in EU imports was less than 9%.
Although the total volume of natural gas imports in Europe also decreased in August, it was only 5% lower than the traffic in October 2021.
The above data shows that Russian natural gas is not as important as it accounts for 40% before 2021. In just a few months, Europe compressed Russia's natural gas imports to less than 9%. In addition to maintaining normal natural gas consumption, it also filled underground gas storage facilities to about 85% 2 months in advance.
This means that closing the Nord Stream No. 1 natural gas pipeline will only have a 2.6% impact on the current natural gas consumption in the EU. If all Russian natural gas supply is cut off, it will only increase the gap of 9% of the EU's natural gas consumption.
2. Can the EU’s natural gas storage ensure that Europe has spent the winter?
European natural gas underground gas storage equipment is filled to 85%, which can only ensure natural gas consumption in Europe for 2-3 months. Therefore, many people are worried that what if Russia completely dies, what will happen to Europe in two or three months?
Seeing such a problem, I really doubt that his IQ is really not 50 enough, or he pretends to be confused because he understands it.
What is the underground gas storage system in Europe for? It is not used for normal gas supply, but for the in case of inadequacy, or in the event of a certain gas supply channel interruption, it can be supplemented from the reserve gas. In other words, after the European gas storage system is filled with gas, it does not mean that Europe stops purchasing natural gas, but is filled with it just in case.
For example, Russia's Nord Stream No. 1 was cut off, affecting Europe's natural gas consumption by 2.6%. Then, when other natural gas import channels continue to import, reserve gas can replace Nord River 1 to supply gas to Europe for 77 months (2 months/2.6%). If Russia completely quits gas, according to the proportion of 9% of Russian gas in August, the reserve gas can replace Russian gas to supply gas to Europe for 22 months (2 months/9%).
Look at the picture above. Currently, the pipeline natural gas in Europe mainly comes from Norway and the EU. Russia is only ranked third, and there are Libya , Algeria , and Azerbaijan . LNG, which consumed only about 12% of the EU last year, rose to one-third in August. Therefore, readers remember that Russia's cessation of gas to Europe does not mean that the natural gas produced by the United States, , Middle East , Africa, and Europe will cessation. Natural gas outside Russia will continue to be supplied to Europe, and the EU's underground gas storage system is currently located there to make up for the part where Russia's gas severance is at any time.
. On September 5, European natural gas futures prices soared by 23%. Can Europeans still afford natural gas this winter?
I believe that most people will see titles such as "Russia has used a fatal blow, and European gas prices are going to rise wildly", "Russia gas supply cuts off three consecutive kills, European natural gas has risen by 33%," "The price difference is as high as 40 times, and the price comparison between Russia and Europe gas prices is tragic! Can Europe really get rid of Russia?" They will think that the EU's sanctions on Russia are kicked to the iron plate, it is a suicide, and Europeans have to pay a heavy price. This winter, Europeans are expected to be bankrupt by natural gas, which is 40 times more expensive than Russia.
However, think rationally, are futures prices and spot prices the same thing? Most people do not understand futures . People who have studied finance know that the purpose of spot trading is to transfer ownership of commodity . Futures are not, buying and selling futures contracts. Some people want to speculate and make profits, while others want to avoid price risks. Therefore, most commodity futures and spot are basically out of touch. The spot price is relatively stable, and the price fluctuation range of futures is much larger than the spot price fluctuation range.
But the authors used the spot price for EU natural gas just now, but the futures price. For example, on September 5, European natural gas soared, with a peak of more than 30% and a closing price of 23%, which is the price of natural gas futures; for example, the 40-fold price difference with Russia uses European natural gas futures, which compares with the spot price of natural gas in Russia.
Everyone asks three barrels of oil, they will use crude oil futures for arbitrage and value-preserving trading, but does one ton of the crude oil they really buy come from the futures market? Of course it is impossible. The same is true in Europe. The natural gas purchased by EU countries, including LNG, does not have a cubic meter from the futures market. European natural gas futures prices fell 40% the previous week and rose 23% today. This has nothing to do with the purchase price of European natural gas and the consumption price of European natural gas.
is related to the consumption price of European natural gas in Europe. This EU natural gas import price curve chart in July 2022. In June 2022, the EU's MMBtu import price of million-inch heating unit natural gas was US$34.35. It was only 27.2% higher than around $27 in February before the war, and 19.2% lower than the April high of $42.5.
my country's natural gas import price in July was 2.5 yuan, up 17.3% from February, and the import price of liquefied natural gas was 4.72 yuan in July, up 9.3% from February 4.32, and an average increase of 13.5% from February.In fact, compared with the pre-war period, the increase in European natural gas import prices was only 13.7 percentage points higher.
These data fully demonstrate that the EU's natural gas import prices do not rise and fall as much as European natural gas futures prices, and rise so outrageously. The natural gas increase in our country is less than 14 percentage points higher.
Will anyone think Europeans will become poor due to the price increase of natural gas?
. What measures does the EU have to reduce the impact of rising natural gas prices on production and life? Although the natural gas price is not as outrageous as the Chinese website circulated, compared with February, the 17.3% increase is also very high. In addition, the EU implements a mechanism for linking electricity prices to natural gas prices. The rise in natural gas prices will drive the related electricity costs to rise, which will affect some energy-intensive industries including fertilizers and aluminum manufacturers to reduce production scale and cause EU governments to invest billions of dollars in programs to help families.
Among European countries, the German Chancellor Olaf Scholz, who is the most dependent on Russian gas, said on Sunday (September 4) that Germany has been preparing for a complete stop to purchase natural gas from Russia. Germany is also Europe's largest natural gas consumer and is currently in the second phase of a three-stage emergency plan to deal with a reduction in supply. Entering the third phase, we will see some industrial gas rations.
In fact, the impact of natural gas on Europe is smaller than the data I introduced. This is because:
First, after Russia's invasion of Ukraine, Europe quickly launched plans to reduce its dependence on Russia's fuel, shifted to alternative suppliers of natural gas and other fuels, and promoted faster deployment of clean energy supplies. Germany has begun developing liquefied natural gas (LNG) receiving stations to enable it to receive gas from global suppliers and get rid of Russian gas imports. After spending this winter, European LNG receiving station can fully meet the needs of European imports.
Second, Europe has increased coal power generation. Because the price increase of coal is much smaller than that of natural gas, and the alternative supply of coal has been implemented 100%. This measure will help Europe save about 5% of natural gas consumption.
, the EU is weighing new natural gas benchmarks and price ceilings. The EU Energy Minister will discuss the gas price cap, emergency liquidity support measures for high-energy-consuming enterprises, and the decoupling of natural gas and electricity prices at its September 9 meeting. At the same time, further subsidies are also prepared to help household energy consumption.
European Commission Chairman Ursula von der Leyen said last week that she was sure that price caps should be set for Russian gas. "Given that the price of natural gas has stabilized between 5 -35 euros/MWh over the past decade, any upper limit above this level will ensure that Russia is above its marginal production costs."
fourth, and there are many measures in the EU that can be used to ease gas demand, such as increasing the supply of renewable energy, restarting nuclear power plants, and suspending the carbon tax until the end of the war.
It is reported that as part of the preparatory work for the Energy Ministers’ Meeting, the European Commission is also evaluating options for financial regulation of the Dutch title transfer fund, its main index for virtual natural gas markets for long-term European contracts, to avoid speculation.
Bloomberg News in an internal EU document seen on September 5 said: "The price premium between the TTF and the off-ship index for European LNG delivery has expanded significantly, which has raised questions about its representativeness as an index connecting the entire EU 27 contracts."
According to the EU implementing agency, it is not ruled out to establish a European LNG trading platform.
[Author: Xu Sanlang]
