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Earth Science

Europe Now Has So Much Natural Gas That Prices Just Dipped Below Zero (cnn.com) 183

Europe has more natural gas than it knows what to do with. So much, in fact, that spot prices briefly went negative earlier this week. From a report: For months, officials have warned of an energy crisis this winter as Russia -- once the region's biggest supplier of natural gas -- slashed supplies in retaliation for sanctions Europe imposed over its invasion of Ukraine. Now, EU gas storage facilities are close to full, tankers carrying liquefied natural gas (LNG) are lining up at ports, unable to unload their cargoes, and prices are tumbling. The price of benchmark European natural gas futures has dropped 20% since last Thursday, and by more than 70% since hitting a record high in late August. On Monday, Dutch gas spot prices for delivery within an hour -- which reflect real time European market conditions -- dipped below 0 Euro, according to data from the Intercontinental Exchange.

Prices turned negative because of an "oversupplied grid," Tomas Marzec-Manser, head of gas analytics at the Independent Commodity Intelligence Services (ICIS), told CNN Business. It is a hugely surprising turn of events for Europe, where households and businesses have been clobbered by eye-watering rises in the price of one of its most important energy sources over the past year. Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, says unseasonably mild weather is largely responsible for the dramatic change in fortune. "In countries like Italy, Spain, France, we're seeing temperatures and [gas] consumption closer to August and early September [levels]," he told CNN Business. "Even in countries in the Nordics, the UK and Germany, consumption is way below the average for this time of the year," he added.

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Europe Now Has So Much Natural Gas That Prices Just Dipped Below Zero

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  • by Comrade Ogilvy ( 1719488 ) on Thursday October 27, 2022 @02:03PM (#63003359)

    I wonder how long Putin's many friends will avoid telling him that Europe is well-prepared for winter.

    • by Darinbob ( 1142669 ) on Thursday October 27, 2022 @04:08PM (#63003757)

      It might not be well prepared. Supply is ok now, but they need to store it until winter instead of using it. Once someone proclaims "crisis averted!" then the crisis will start again, if my experience in human behavior holds up. Likely there will still be huge conflicts about using natural gas to keep homes warm versus using it in industry, and which group will politicians favor most.

    • This is not obviously the case, though. The price dip was in the hour-ahead price and came about because storage is full and tankers are waiting offshore to unload; month-ahead and season-ahead prices are down from their peaks in August but still considerably above where they were this time last year. Europe has been filling its gas storage in anticipation of winter and October has been unusually mild; Europe's gas storage facilities are still woefully inadequate to see it through anything like an average
  • by wakeboarder ( 2695839 ) on Thursday October 27, 2022 @02:04PM (#63003363)
    Or did demand destruction happen so much that they have an oversupply?
    • Between the weather and the national level curbs (some countries making it illegal to use heat or AC - for example, in France, you can't between the temperatures of 19C and 26C) the demand is way down.
    • by Luckyo ( 1726890 ) on Thursday October 27, 2022 @02:17PM (#63003403)

      Bingo. Most of major companies using natgas as input went insolvent in Germany in last few months. Of those remaining, most already announced plans to move closer to piped gas from Algiers, places like Spain and Portugal.

      So as insolvency procedures progress, demand is starting to go down. The reason why Sholz is desperately pushing for sale of the port to COSCO against pretty much entire political establishment is because this is basically the hail mary to offer something, anything to quickly offshoring remaining German industry, before German de-industrialization is a done deal.

      I remember reading this list through that was reported just in a single day this month:

      80 years after foundation: German furniture manufacturer Hülsta insolvent.

      85 years after foundation: Large bakery chain Thilmann insolvent.

      125 years after foundation: German construction company Wolff Hoch- und Ingenieurbau insolvent.

      130 years after foundation: German confectionery manufacturer Bodeta insolvent.

      156 years after foundation: German automotive supplier Borgers insolvent.

      170 years after foundation: German soap maker Kappus insolvent.

      This is not total. This is just what happened in one day less than a month ago if I remember correctly. So this would be a fitting timing for demand to crash as insolvency procedures stop production due to lack of delivered inputs as they're not longer reliably paid for.

      • by skam240 ( 789197 )

        If 9 months of increased electricity bills did these companies in then they werent stable to begin with. On a quick internet search it looks like the average factory in the US spends a bit over $5k on electricity https://www.costanalysts.com/a... [costanalysts.com]. Now obviously that number is going to vary a ton based on the size of the factory but what this number does show us is that electricity is only a tiny portion of a business' overall operating costs. If these German companies cant absorb a doubling of costs like th

    • by GoRK ( 10018 )

      There is plenty of gas. It's been oversupplied worldwide for more than a decade.

      Energy ratio of oil:gas =~ 6:1 (bbl:mcf)
      Price ratio of oil:gas =~ 15:1
      Price ratio of oil:lng =~ 11:1 (~30% losses to liquefaction and shipping)

      It is wholly unsurprising that Europe has no problem acquiring "cheap" LNG instead of "dirt cheap" Russian gas now that everyone is looking at where they are sending their money. The better question to ask is why they weren't doing this in the first place.

      • More than that, did everyone forget that natgas is produced in such quantity that it's commonly just burnt off at the source - known as "flaring" ?

        If there's a market for it, we stop doing that and instead ship it to the market. Duh.

    • Imported gas demand decreased for various reasons not just the weather. Germany is keeping some nuclear plants running and restarted some coal plants, while everybody living in villages outside the big cities stocked up on coal and firewood. EU gas production also increased - some marginal fields are producing again, while Norway and UK increased North Sea production. Wind and solar farm projects also sped up.
    • It's a storage thing. They have no capacity left, wouldnt know where to put the stuff if you gave it to them for free (hence the price). The same thing happened to oil during covid for a brief period of time.

      If you want to know about Europe's energy needs, look at the 6 month forward price. Oh surprise, definitely not 0.

  • Sadly (Score:3, Interesting)

    by Anonymous Coward on Thursday October 27, 2022 @02:05PM (#63003365)

    This isn't doing a thing for end-user prices.

    • It will save end-user lives, at least.
    • I'm happy that gra-mere isn't going to freeze.

      But you know how this works, consumers always pay more and more because profit margins must always go up.

      • So buy shares in these profitable energy companies and enjoy the dividends.
      • by AmiMoJo ( 196126 )

        Many EU countries have windfall taxes on gas suppliers to help offset the cost for consumers. In fact the head of BP said that the British government should levy a windfall tax on his company too, but they have so far declined to do so.

        In France they also nationalized the biggest electricity supplier, EDF. EDF has been struggling for decades anyway, but after being nationalized the government decided to limit electricity retail price rises to 4%. EDF has been fleecing the taxpayer for years anyway, so it's

        • Oil and gas suppliers are avoiding windfall tax [aol.com] this year if they have significant capital expenditures. The idea that the EU is this egalitarian pro-consumer anti-corporate stronghold is a not all that realistic of a fantasy when you can easily find plenty of holes. It would be one thing if it seemed like people were trying to plug the holes, but too many pretend there isn't any problem or actively defend the behavior.

        • It is exactly the opposite.

          EDF has been subsidizing the French government for decades and is still doing it. The amount of dividends they pay is trough the roof, way above what the CAC 40 pays, and they are forced to sell a big portion of their electricity at below the market prices via the ARENH.

  • Spinning rapidly (Score:5, Insightful)

    by cirby ( 2599 ) on Thursday October 27, 2022 @02:18PM (#63003407)

    The storage facilities are full, which is good.

    Mostly.

    The big question is "do they have enough stored in those tanks to get them through the winter with a reduced ongoing input of natural gas?" They keep sliding past that part.

    • by kqs ( 1038910 )

      No one knows. And no one can know, since it depends on how bad the coming winter is. But it's much better to be in this situation than to have half-full reserves at the end of October.

    • by AmiMoJo ( 196126 )

      It depends if they plan to share it with the UK. The UK closed most of its storage facilities so has very little capacity left. It didn't seem worth keeping them open when we could just get gas from the continent... That we then majorly pissed off with brexit... And who now need all that gas for themselves.

      This winter is going to be hard for us.

    • Yes they do, no one is sliding past it. Collectively though, individual nations may need to buyfrom others. E.g. Austria has a winter's supply in its caverns. Germany does not, but the Netherlands has an oversupply so Germany will likely need to buy from NL. Additionally it's all dependent on the type of winter. It's going to be 20C next week, unseasonably warm, which is one of the reasons Europe massively overshot it's storage target. If winter stays like that we could see another market upset in the oppos

  • by stabiesoft ( 733417 ) on Thursday October 27, 2022 @02:21PM (#63003421) Homepage
    Basically everything is full and nowhere to put more. As real winter hits and demand surges, so will prices. I believe Nat Gas from the permian in W TX went negative too. A pipeline was down for maintenance and nowhere to go. It will go up again once the maintenance is done. Gas has a stickier price than juice with swings taking a few days/weeks instead of the hours I see with juice. Juice got close to zero in TX as wind is blowing sun shining and very moderate temperatures so demand is down. I think wind/solar is doing about 2/3rds of demand today. Way up from a more typical 25% of daytime demand, so basic economics. Supply up, demand down, price down.
  • by gurps_npc ( 621217 ) on Thursday October 27, 2022 @02:26PM (#63003441) Homepage

    Europe uses a Just In Time delivery for natural gas. That is, they have little storage and instead expect a constant pipeline to keep their needs filled. Works fine when the pipe is working, sucks when it is not.

    They have full tanks now, when they are not using the gas; but will use up their supply fast.

    • Not exactly. There is enough gas in storage to last about three months - and it is replenished with pipelines from all directions, as far away as Azerbaijan.
    • by pong ( 18266 )

      Europe has storage capacity for about 3 months use at normal consumption rates. That's not the problem. The problem is that Europe has relied too much on one supplier of natural gas. But thanks for participating in the discussion.

    • by AmiMoJo ( 196126 )

      This winter is looking mild, and countries that have storage will probably be okay. For example, Germany has 245TWh, with a consumption of about 930TWh last year. So they have about a quarter of their yearly usage in storage right now, a pretty significant amount.

      The EU requires member states without storage to have a solidarity agreement with other states that accounts for 15% of their gas usage.

  • by laughingskeptic ( 1004414 ) on Thursday October 27, 2022 @02:30PM (#63003453)
    This does not mean what many people seem to think it means. This is likely a sign that they have insufficient storage capacity because their infrastructure became accustomed to reliable Just-In-Time supplies. As soon a couple of big ships finish offloading, spot prices will swing again. It is also a sign that in their panic they threw logistics out the window when ordering because they have ships queued to offload. Every day a ship sits in the harbor is a future day of delayed deliveries. There are already not enough ships in the world to make up for the loss of Nordstream so they need to be using these ships as efficiently as possible.
  • When most of those ships go elsewhere to sell for higher prices. Higher than zero anyway
  • Have you noticed how this affected prices everywhere?

    Food escalated in price due to extremely high transportation costs, several big farms of tomatoes and other produce had to shut down due to extreme heating costs. People in Scandinavia scrambled to get bio fuel (they are heavy users of pellets and wood) and it was sold out for months ahead, not only that - prices for pellets and wood as much as quadrupled in price.

    And when everyone has bought out everything at exorbant prices - all of a sudden everything

    • Economic reallocations don't magically happen just because they need to, they happen when they rise to the level of causing somebody expense, discomfort, or pain.
  • by awwshit ( 6214476 ) on Thursday October 27, 2022 @02:57PM (#63003543)

    Does Europe have underground storage facilities like Aliso Canyon? The US stores a lot of gas this way.

    https://en.wikipedia.org/wiki/... [wikipedia.org]

    • All long-term natural gas storage is underground. Though there are certainly some folks in San Jose looking into cloud storage solutions. ;)
    • Yes. Generally any large volumes of gas are stored underground. Europe has about a 3 month supply of gas, their storage is currently full, additionally LNG tankers are floating off the coast unable to unload (which is one of the reasons for the price dip).

  • We have uncommonly warm weather for this time of year. Thankfully.

    • I'm glad that you do, wherever you live. I live in southeastern Colorado, and we've already had both sleet and snow, although not very much. We're expecting snow tonight, and I'm wondering if we're going to have a White Halloween this year. Again.
  • CNN is, no matter how much they pretend otherwise, an American news outlet, and the US is about to have its very important midterm elections at a time of American economic misery and international chaos. American news networks are scrambling to convince voters that all's well while early voting is underway, and telling them all is suddenly well in Europe is just a part of that. I suspect their reportage of European energy will flip in about 3 weeks. Consider:

    1. the article concedes that this was a brief gli

    • If you want to read a novel on the supply and demand economics of gas in Europe then go buy a 300 page book on the topic. News articles exist to report generally singular things. No one gives a shit about the election in the USA or your weird conspiracy theory. Certainly not financial times, or any of the many international news outlets covering this actual story.

      1. Whether it's a blip or not is irrelevant. The spot blip below zero is a huge fucking story given the ongoing gas prices have plateaued at $100/

      • Either way, it's looking like Europe and Germany are going to make it through the winter without too much trouble.

  • Gas tankers queue off the coast of Europe in hope that prices will rise [telegraph.co.uk]. "Almost 50 vessels waiting for colder months before docking to sell their fuel."
  • All this says is Europe doesn't have infrastructure built to properly handle it's energy needs and was using russia for both the pipelines and storage.

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