Europe Faces Emergency Natural Gas Reserves "Price Soars, Raising Concerns of Chaos"

Up to Five Times More Natural Gas Needed Due to War in Ukraine
Governments Weighing Market Intervention
"Could Lead to Higher Prices"

As natural gas stocks in various European countries are being depleted faster than usual, the European Union (EU) member states have raised an alarm over natural gas reserves. However, concerns have been raised that government intervention in purchasing could further drive up natural gas prices and cause market turmoil.

The largest liquefied natural gas (LNG) plant in Western Europe located in Hammerfest, Norway. Photo by Reuters-Yonhap News.

On the 30th (local time), Bloomberg reported that as Europe approaches the period when it needs to replenish about two-thirds of its total natural gas stocks, "government intervention in the natural gas market could make the market more unstable."

Energy distributors and other participants in the natural gas market typically begin stockpiling natural gas starting in April. However, recent movements in natural gas prices, which differ from the norm, have raised concerns that profitability may not be secured.

Russell Hardy, CEO of Vitol Group, the world's largest oil trading company, said, "A short-term solution is needed to enable stockpiling even when prices are as high as they are now," adding, "There is debate over who within the market will propose that solution."

In response, Bloomberg reported, "In Germany, the proposal by the gas market operator to provide subsidies for contracts that are not profitable shocked market participants." In fact, Germany proposed subsidies in January, which caused a sharp rise in natural gas prices.

However, if stockpiling is delayed while waiting for natural gas prices to fall, there is a risk of facing unexpected variables such as a colder winter than usual or the continuation of the war. In particular, due to the destruction of much infrastructure caused by the war in Ukraine, it is estimated that up to five times more natural gas will be needed this year compared to last year. Since most natural gas supplies from Russia have been cut off, even the remaining supply through Ukraine stopped in January. Additionally, experiencing the first cold winter since the war began has caused natural gas stocks to decline faster than usual.

According to EU Commission regulations, member states must fill at least 90% of their natural gas storage facilities by November 1 each year. However, recent calls to revise related regulations have increased uncertainty over natural gas prices.

Marco Zalfrank, head of the European division at Swiss energy company Axpo, said, "The key issue is whether the EU Commission regulations will be changed," adding, "If the regulation changes are announced only in mid-year, there will be only a few months left to stockpile natural gas, which could affect prices." Patricio Alvarez, senior researcher at Bloomberg Intelligence, also said, "If the EU Commission sends a (specific) signal that it will apply natural gas stockpiling regulations more flexibly, it could help member states within the region."

This content was produced with the assistance of AI translation services.