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Europe’s Energy Crisis May Not End Until 2024

Europe’s Energy Crisis May Not End Until 2024 thumbnail
  • The EU gas storage units are nearly full giving some relief to fears of shortages
  • Challenges remain for the continent’s energy security as winter arrives
  • The challenges will persist into the winter of 2023-24.

The worst energy security fears of spring and summer as regards the coming winter in the European Union-EU, have been somewhat allayed. Earlier this year when war broke out in Ukraine and it became clear that the conflict would drag on for months, if not years, the EU appeared perilously in danger of a winter “Polar-Geddon,” as cold air gripped the continent. Largely forgotten and retired gas storage caverns, that hadn’t been filled in the expectation of a steady supply from Russia via the Nordstream I and II pipelines, suddenly were thrust front and center into the public eye.  Troubles often come in twos. The next shoe to drop was the deflation of expectations of much of the EU electric grid base load being met by wind and solar farms, when the elements refused to cooperate. Beginning in the middle of last year, it was noted that the wind wasn’t blowing and the output of solar farms was less than predicted. These two events appeared ready to converge upon the EU and presenting it with a stark, and chilly future for the winter of 2022-23.

As is often the case, the fullness of time alleviated the worst fears as energy leaders in the countries that make up the EU, sprang into action. They turned to Norway for an additional 90 bn cubic meters of gas to begin filling the storage caverns. The infrastructure was in place, it was just a matter of price. The also U.S. responded with a massive sealift of billions of cubic feet of LNG, mostly from the Gulf Coast Cryo plants, and little by little the starkest fears of early spring were put to rest.

Now the WSJ reports that EU gas caverns are largely filled, thanks to U.S. LNG exports. Europe’s population is now in Nature’s hands as winter approaches.

“Storage facilities of gas for heating and power generation are almost full, consumption is down and liquefied natural gas tankers are steaming in. Europe is in a stronger position than feared in recent months, after Moscow slashed gas deliveries in retaliation for Western sanctions over the invasion of Ukraine.

However, much could go wrong. One long cold spell or a busted pipeline could upset the region’s preparations, threatening emergency rationing, blackouts and a deeper economic recession. Officials and analysts say the willingness of consumers to cut back on gas use will be key for getting through the winter.”

The focus of the rest of this article will be on what indeed could go wrong, and put the citizens of the EU in jeopardy.

Asian demand, energy cutback compliance, and the weather in the U.S. could make the difference

While seemingly out of the woods for the early part of this season, with full storage caverns, several challenges lie ahead for this energy beleaguered continent.

The first is that Asian demand, and in particular Chinese demand is expected to resurge in the coming months. The focus on the Eastern Hemisphere is understandable as its growing economies are the product of this regions ascendancy as manufacturing and distribution hubs for nearly everything. This relentless demand, should it occur will challenge the import hubs of the EU, as they begin discharging stored gas this winter and begin looking for new supplies to address the winter of 2023-24.

Bloomberg noted in an article recently, that China which had been reselling cargoes of U.S. LNG to the EU for a profit, was no longer doing so.

“China told its state-owned gas importers to stop reselling LNG to energy-starved buyers in Europe and Asia in order to ensure its own supply for the winter heating season.”

If this action signals a turn in China’s outlook, then EU buyers will face increased competition for U.S. supplies, of which over the summer they received the Lion’s Share. Loaded LNG cargoes are very fungible and it is common for the final destination of an LNG carrier to change after it departs port.

The second is making it through this winter without the draconian cutbacks discussed in the WSJ article. Compliance with the urgent conservation directives will determine if EU energy security is at the mercy of the weather this winter.

“Europe is probably as well prepared as it could be. The infrastructure is pretty much maxed out,” says Michael Bradshaw, professor of global energy at Warwick Business School. “We are up against the hard reality that there are physical limitations to the ability to replace Russian gas in the short term. That means that doubling down on the demand-reduction side of the equation is vital.”

“A lot could go wrong. If freezing weather jacks up demand, stockpiles could drain and prices could shoot to levels that hammer companies and government finances. Low temperatures could also spark a contest between North America and Europe for LNG supplies.”

And that leads us to our third point in this macro thesis. It is only pure serendipity that things aren’t much worse in the U.S. than they are. Sky-high prices for coal have kept U.S. utilities burning gas this summer for electricity generation. That should have kept prices higher than they were. What happened?

You perhaps remember that fire in the Freeport LNG plant near Galveston in June? It had the effect of putting 2-BCFD back on the market, and available for injection vs export. Hence we are only ~4% under 5-year averages in our storage. This week.

It will be interesting to see what sort of draws are seen in next week’s report as a big chunk of the nation feels winter’s first blast. Nor am I optimistic, absent a big surge in gas drilling, that we will be able to do anything to materially impact this tight supply scenario.

The trend isn’t encouraging for mid to long term new supplies as noted in the chart above. This is compiled from data put out by the EIA and only measures a running average between production noted in various reports and the number of rigs turning to the right. A simplistic measure as I have noted in past reports, but trends are instructive of their own accord. And the trend suggests, for whatever reason, well productivity is declining.

Your takeaway

The challenges for the EU will remain through to the heating season of 2023-24, depending as we have noted in this article on the weather on both the European and North American continents. This will drive prices for gas which have fallen sharply over the third quarter.

One way I am looking to arbitrage this price action is selecting producers that stand to benefit. One I am looking at in particular is a Canadian player, ARC Resources, (TSX-ARX). It is Canada’s third largest gas driller, with high margins and access to U.S. southern LNG hubs and east to the big population centers of Toronto and Montreal. ARX is generating free cash at a rate of $2.0 bn CAD, and has growth plans that are covered by Free Funds Flow. ARX pays a modest dividend, currently yielding 2.7%, and trades current at 6X EPS. There are others worth considering as well. Tourmaline Oil Corp, (TSX: TOU) is one of the country’s biggest gas drillers with 80% of its daily production comprised of 2.2 BCFD. It is trading at 9X EPS, which is why my interest has run more to ARC Resources.

I like the Canadian gas drillers as opposed to the big American gas drillers due market access. EQT, (NYSE:EQT) and CNX Resources, (NYSE:CNX) among others draw on the Marcellus super-basin for their reserves. The Marcellus is locked behind the Appalachian Mountains with no pipeline access to the big consumer markets in New York City, and Boston. In spite of years of work by pipeline builders to obtain permits to build the Mountain Valley Pipeline, and Atlantic Coast Pipeline, both are still incomplete with no clear pathway to completion.

Whichever way you go, I think the gas drillers are a safe bet if a cold winter here and in the EU challenges supplies as we have discussed.

OilPrice.com



28 Comments on "Europe’s Energy Crisis May Not End Until 2024"

  1. Duncan Idaho on Sat, 22nd Oct 2022 7:05 pm 

    1,067,685

    Dead Merikins from covid

    Hint:
    More than all the war deaths in Merikin history

  2. Theedrich on Sun, 23rd Oct 2022 12:37 am 

    Funny. No mention of a US blowup of NS pipelines. Another case of avoidance of the elephant in the room.  Just the assumption that Germany is going to pay vastly more for U.S. LNG than for Russian gas, and sink impoverished to medieval levels in the process.  But geography-challenged Americans are supposed to imagine that Biden (along with his son) is virtuous because he is shipping stunning numbers of weapons and many tens of $billions to the most corrupt country in Europe.  This media-delivered conviction is consonant with the belief of most citizens that a talking snake led to the White guilt.  And when Germany, followed by the rest of Europe, withers away, the demented monarch and his swamp creatures will make sure that no one knows why.

    Because Americans have a lust for ignorance.

    𝖁𝖊𝖗𝖎𝖙𝖆𝖘 𝖛𝖔𝖘 𝖑𝖎𝖇𝖊𝖗𝖆𝖇𝖎𝖙.

  3. Duncan Idaho on Sun, 23rd Oct 2022 10:58 am 

    Because Americans have a lust for ignorance.

    Well after “electing” the Mandarin Mussolini, how much stupider could they be?

  4. makati1 on Sun, 23rd Oct 2022 5:32 pm 

    Duncan, they “elected” (elite appointed) Zombie Biden and Cackling Harris. They make the village idiot look like Einstein.

    The West is looking way under the barrel for prompter readers these days. Another sign of the ongoing collapse. So be it.

  5. makati1 on Sun, 23rd Oct 2022 8:46 pm 

    Dictatorship is already all over the West. “Elections” are for show only.

    Who are the dictators?

    Answer: Anyone you cannot post a negative comment about.

  6. peakyeast on Mon, 24th Oct 2022 12:14 am 

    Duncan: What is the median age of the people who died from the new influenza? 82?

    And those under had obsesity, cancer, diabetes?

  7. makati1 on Mon, 24th Oct 2022 2:24 am 

    The 2022/2023 flu season has begun in the north. I’m waiting to see what clown circus happens this winter in the land of eternal stupidness. I don’t think lock-downs will work again, nor the face diaper bullshit. Deaths will be up, not from flu, but from the previous “vaccines”. “1984 Newspeak” will be in hyper-drive. It should be interesting…if you are not involved.

  8. Message pour Guy Cormier president Desjardins on Mon, 24th Oct 2022 7:39 am 

    Dit a ta merde de président, Guy Cormier, que lui et sa famille vont être exécuté pour le cancer de la peau facial saignait mortel. Dit a ta merde de président, Guy Cormier, de contacter Francois Legault, Mélanie Jolie et Domique Anglade et de demander si eux aussi on reçus pour email de notifications d’exécution par cancer facial saignant. Seulement au Dieu peut exécute du monde avec le cancer facial.
    Tu n’as pas besoin de me répondre. Dominique Anglade va confirmer ce que je dis.

  9. Desjardins is woke. on Mon, 24th Oct 2022 3:52 pm 

    La AI responde from Desjardins.

    Sachez qu’il est toujours un plaisir pour nous de vous assister et vous informer. ?

    Néanmoins, nous vous invitons à faire preuve de courtoisie et de respect en tout temps dans vos échanges. Tout propos haineux touchant l’ethnicité, l’origine, la couleur, la religion, le sexe, l’orientation sexuelle, l’age ou la déficience physique ou intellectuelle ne seront pas tolérés.?

    Chez Desjardins, nous célébrons la différence. Notre coopérative incarne la diversité que représentent nos membres et notre clientèle, celle qui enrichit notre société.?

    En terminant, sachez que les conseillers des Services

    N’hésitez pas à nous écrire de nouveau si nous pouvons vous accompagner, c’est avec plaisir que nous répondrons à vos questions ou inquiétudes.

    D’ici là, je vous souhaite une agréable fin de journée !
    Mon message to Desjardins

    Dit a ta merde de président, Guy Cormier, que lui et sa famille vont être exécuté pour le cancer de la peau facial saignait mortel. Dit a ta merde de président, Guy Cormier, de contacter Francois Legault, Mélanie Jolie et Domique Anglade et de demander si eux aussi on reçus pour email de notifications d’exécution par cancer facial saignant. Seulement au Dieu peut exécute du monde avec le cancer facial.
    Tu n’as pas besoin de me répondre. Dominique Anglade va confirmer ce que je dis.

  10. Desjardins is a communist organization on Mon, 24th Oct 2022 8:35 pm 

    Only an artificial Intelligence can produced an answer like the one I received from Dejardins above Normally you are expecting on answer telling you that it is inappropriate to do death threat or no answer at all

    Basically, I received for Desjardins a complete description of what is the communist
    manifesto of Quebec. This earth experiment will end badly for everyone.

  11. Desjardins fait la promotion du communism on Tue, 25th Oct 2022 5:48 am 

    La réponse appropriée et professionnel a ce message

    Dit a ta merde de président, Guy Cormier, que lui et sa famille vont être exécuté pour le cancer de la peau facial saignait mortel. Dit a ta merde de président, Guy Cormier, de contacter Francois Legault, Mélanie Jolie et Domique Anglade et de demander si eux aussi on reçus pour email de notifications d’exécution par cancer facial saignant. Seulement au Dieu peut exécute du monde avec le cancer facial.
    Tu n’as pas besoin de me répondre. Dominique Anglade va confirmer ce que je dis.

    aurait été du être quelque chose comme ceci.

    Merci de nous avoir contacter. Nous comprenons que des fois la vie est stressant et tous le monde a déjà eu des moment de colère extreme.

    Nous vois souhation une bonne journée.

    Au de ĉa, j’ai recu un réponse créer par un AI que m’enmore tous le point comminust de Desjardins comme:

    Tout propos haineux touchant l’ethnicité, l’origine, la couleur, la religion, le sexe, l’orientation sexuelle, l’age ou la déficience physique ou intellectuelle ne seront pas tolérés.?

    Chez Desjardins, nous célébrons la différence. Notre coopérative incarne la diversité que représentent nos membres et notre clientèle, celle qui enrichit notre société.?

    Depuis quand Desjardins est devenu une organisme corporatif charger de faire la promotion du communisme.

  12. peakyeast on Tue, 25th Oct 2022 7:03 am 

    All cause mortality is already up – interestingly it is directly proportional to the vaccine uptake.. Even the EU parliament has noticed this – and the corrupt relationship between vaccine producers and government officials.

    It is really mysterious? What could be causing this? Definitely not the vaccines……..

  13. Duncan Idaho on Tue, 25th Oct 2022 10:30 am 

    The difference between Jim Jones and Trump is that Trump would charge you for the Kool-Aid.

  14. Duncan Idaho on Tue, 25th Oct 2022 1:55 pm 

    California is about to become the world’s 4th largest economy.

    The Golden State is on track to overtake Germany for the No. 4 spot, according to an opinion column from Bloomberg News editor-in-chief emeritus Matthew Winkler. It became the fifth largest economy in 2015, surpassing the United Kingdom, France and Brazil.

    https://www.sfgate.com/news/article/California-is-about-to-become-the-world-s-4th-17531886.php

  15. makati1 on Tue, 25th Oct 2022 4:17 pm 

    Really Duncan? The Sin State is dying faster than the rest of the US. People and major businesses are moving out by the tens of thousands to better, more sane, places. They have a WEF brainwashed governor and a state full of Dumbocrats. Not exactly an economical growing combination.

  16. mousepad on Tue, 25th Oct 2022 4:21 pm 

    mak: People and major businesses are moving out by the tens of thousands

    You forget the influx of druggies. Selling and consuming all them drugs certainly has positive effect on the GDP. 🙂

  17. Biden’s hairplug on Tue, 25th Oct 2022 5:44 pm 

    The only way for Europe to solve the energy crisis is to strike a deal with Russia. For that to happen, the US needs to be sent packing from Europe. This could be achieved by an uprising of the population against the US, its vassal regimes and the media.

  18. im very shure elite whitey (((supertard))) Alice did not take the #depopulation shot on Tue, 25th Oct 2022 8:22 pm 

    d

  19. elite darkie supertard ye said elite whitey (((supertards))) eff him over and hes buying parlor on Tue, 25th Oct 2022 8:24 pm 

    supertards please change ur undies after 3 days

    please feel at ease among friends
    we’re all lovers of supremacist muzzies here

  20. FamousDrScanlon on Wed, 26th Oct 2022 2:59 pm 

    California is not a country. California is a state within the United States of America. Comparing the STATE of California’s economy to the NATION of Germany’s economy is fucking stupid.

    If California seceded and the United States of America stopped buying defense industry products from them, then what size would California;s economy be?

    There is a shot ton of other ways to prove how fucking dumb this stupid fucking never ending state of California’s economy vs this or that nations economy is.

    It’s only dumb fuck Americans who play this retard game.

    Hey how big is North Carolina’s economy compared to South Carolina’s economy minus the economy of Little Rock Arkansas divided by sales tax on peanut butter?

  21. makati1 on Wed, 26th Oct 2022 3:53 pm 

    Famous, you got it right! It appears that Califorication will soon be importing food and maybe even water. Doesn’t sound like a good place to live…unless you are a druggie.

  22. mousepad on Wed, 26th Oct 2022 8:08 pm 

    mak: Famous, you got it right!

    No he doesn’t. But more importantly GDP per capita is the more interesting number.
    California is $90k/capita vs $50k/capita for Germany.
    That’s pretty amazing. Who would have thought that producing porn and woke movies is such a money maker. I sure didn’t.

    The sad thing of course is that all the money california makes goes to a small percentage of super rich silicon valley dudes, whereas the peons are scraping on skid row.

  23. makati1 on Wed, 26th Oct 2022 10:59 pm 

    mouse, ALL GDP numbers are pure government bullshit. The way they have changed the method of counting in my 78 years is amazing and always to make the US look good. Ditto for inflation lies, unemployment, etc..

    When the market casino hits bottom, (on its way) the rich will be selling apples on the street, or maybe Mary Jane. No one will have money for their internet or even electric. Then what? A “Bangladesh” style Scat Francisco!

    The next ten or more years are going to be very different from the last 10. They will be brutish and the West will get to live like the people they have plundered and stolen from all over the world for the last 500+years. The”golden days” of the West are already over. The piper must be paid.

  24. Biden's hairplug on Thu, 27th Oct 2022 2:58 am 

    “California is about to become the world’s 4th largest economy.”

    What are you trying to say, Duncan? Is this a threat? Just go! Pack your bags and secede, to the delight of the rest of the world. You would be the Slovenia of the US, that seceded first from Yugoslavia and came through the civil war unscathed, where the rest of the country laid in ruins afterwards. And next Mexifornia can be absorbed by Mexico and restore 1820 borders:

    https://preview.redd.it/6ii1ycrki5k41.png?auto=webp&s=7d68b817566c97ace464df78376daec5aa1f4785

    And then throw out all useless gun-toting white repugs. We from Europe will take over those in custody and integrate Yankeeland into Eurosphere, lead by Greater Europe.

    Everybody happy.

  25. Duncan Idaho on Thu, 27th Oct 2022 11:52 am 

    Boy, California being the 4th largest economy on Earth certainly got a response from our conservative friends—
    Maybe the $97 billion budget surplus could help educate these idiots?

  26. FamousDrScanlon on Thu, 27th Oct 2022 12:51 pm 

    Aerospace & Defense

    California has deep roots in the Aerospace and Defense industries and continues to provide the critical infrastructure the Department of Defense relies on to protect our national security. National security activity generates nearly 820,000 direct and indirect jobs for California citizens and produces a total economic impact of $181B each year.

    Recently released data from the US Department of Defense Office of Economic Adjustment illustrates our strength in this industry. This report, covering fiscal year 2017, indicated that California ranked # 1 in Total Defense Spending, Defense Contract Spending and Number of Personnel. Each of these measures indicates the importance of this industry to California.

    https://business.ca.gov/industries/aerospace-and-defense/

    It’s always a bad idea to challenge me and claim I’m wrong if you don’t have the data or even an explanation.

    “Many of those dollars poured into Southern California where the defense and aerospace industry have a strong hold. The companies have secured hundreds of millions in military contracts to provide missiles, drones and other technologies to help the U.S. military fight terrorism.

    L.A. County has more than 50,000 employed in the aerospace and defense industry, according to the Los Angeles County Economic Development Corporation.

    Here are six ways companies in Southern California have benefited from the surge in defense spending:”

    https://dot.la/aerospace-and-defense-industry-2654972540.html

    Further, the US department of Defense (war pigs) is the #1 institutional employer on the planet and many of them are stationed in California and all those people buy or rent houses and buy cars and food and consumer goodies. That’s a shit ton of ‘good for the economy’ people.

    Put all the war pigs stationed in California, the defense industry and all their suppliers out of work via secession and that is BAD fer da Kali conomy.

    That would make the California have the same size economy as Wakanda.

    As for Hollywood, they will shrink by 95% since the US Gov won’t need them for propaganda anymore.

    How Hollywood became the unofficial propaganda arm of the U.S. military

    Second World War launched Hollywood into a propaganda war that continues to this day

    “”Many of [Hollywood’s] films are embedded in the American military. And made to glorify the American military,” Mirrlees said. “No country in the world churns out as many images of itself as the military hero… like the United States does. That is a unique cultural phenomenon.”
    Shaping popular opinion

    Films were, and are, the perfect vehicle for shaping popular opinion, largely because seeing a movie provides such a galvanizing, shared experience.”

    https://www.cbc.ca/radio/ideas/how-hollywood-became-the-unofficial-propaganda-arm-of-the-u-s-military-1.5560575

    “Top Gun: Maverick” is Military Propaganda. Official Documents Prove It.

    “Navy and Air Force units across the country have set up recruitment stalls inside movie halls, hoping to sign up individuals buzzed after watching the high-paced aviation action. But documents obtained under the Freedom of Information Act reveal that the movie was made only after an agreement was signed between Hollywood and the Pentagon, with the Navy insisting on “weav[ing] in” their “key talking points” in exchange for granting the production company extensive access to military hardware.

    Investigative journalist Tom Secker, author of “National Security Cinema: The Shocking New Evidence of Government Control in Hollywood,” was one of those who obtained the documents. Secker explained that “Top Gun: Maverick” was made with an explicit agenda behind it, telling MintPress:

    It’s about rehabilitation of the military’s image in the wake of numerous failed wars. The film also helps foreground human pilots flying an actual combat mission – something very rare in these days of high-altitude airstrikes and drone warfare. It helps distract from all the drone pilots who’ve spoken out about the misery and horror inherent in that job.”

    https://scheerpost.com/2022/06/15/top-gun-maverick-is-military-propaganda-official-documents-prove-it/

  27. makati1 on Thu, 27th Oct 2022 5:00 pm 

    Duncan, maybe you should look at the California Debt Clock and see the negative? It is $550 Billion in debt, no REAL surplus.

    https://usdebtclock.org/state-debt-clocks/state-of-california-debt-clock.html

    Governments lie…always.

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