Deceptive Calm: The results of 2023 for the global gas market

The Infotech magazine published an author's column by Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance under the heading "Deceptive Calm: The results of 2023 for the global gas market".

Back in the autumn of 2022, a new point of market equilibrium began to be felt in the international gas trade. By September of that year, the potential for a drop in pipeline exports from Russia to Europe – after five months of rapid decline – had been exhausted. High exchange prices by the winter of 2022-2023 supported the alternative supply, but most importantly, they greatly cooled demand, balancing both the European gas market and the global LNG market. Abnormally warm weather in the northern hemisphere during the autumn-winter period also provided strong support to the balance. As a result, contrary to many alarmist forecasts, Europe not only "did not freeze" the previous winter, but, on the contrary, ended the heating season with a record high level of reserves in the EU UGS (55.9% as of April 1, 2023, compared with 26.5% a year earlier).

As a result, exchange prices for gas in Europe have been steadily declining since the second half of December. The average monthly TTF spot index reached its lowest point in July 2023 – at the level of $346 per thousand cubic meters (-81% YoY). Daily prices in late May and early June dropped even below $265. An important sign of calm in Europe was the return, starting in May 2023, of the price "premium" to its traditional owner – Northeast Asia. The average annual interregional price differential in 2023 was about 9.5% in favor of the Asian market.

In the EU, according to preliminary data from Eurostat, gas consumption in January-November 2023 fell by 7.9% YoY, and then only due to relatively high demand indicators in the 4th quarter: in January-September, the drop reached 10.2%.

By the end of the year, Russian pipeline gas supplies to Europe, according to ENTSOG and EPDK, will amount to about 44 billion cubic meters (-48.5% yoy), including to EU countries – about 21 billion cubic meters (a drop of almost three times by 2022 and seven times by 2021), in Turkey – within 20 billion cubic meters (-7% yoy). Due to the growth of supplies to China and the near abroad, the total pipeline exports from Russia, according to preliminary estimates, will decrease by 25% yoy, to 93-95 billion cubic meters. m per year. In 2024, the expected increase is unlikely to exceed 3-4%.

Europe still accounts for more than half of Russian LNG shipments (at least from the point of view of the first port of destination), including 47% to EU countries.

In 2024, the increase in LNG exports could reach 18% due to the launch of the first stage of Arctic LNG 2, as well as recovery growth in Yamal and Sakhalin. But given the increasing sanctions pressure from the United States on the Arctic LNG 2 project and the already announced by Novatek, according to leaks in the Western media, force majeure on a number of supply contracts from the first stage of this plant, the actual increase may be significantly lower.