Released November 27, 2024 | SUGAR LAND
en
Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Expiring natural gas contracts from Russia to Europe, along with limited liquefied natural gas (LNG) growth from the U.S. could tighten world natural gas supplies this winter, especially if any significant region experiences colder-than-normal temperatures, said the U.S. Energy Information Administration (EIA).
Supply-demand balances are always delicate for natural gas and LNG due to their importance in energy security and the energy transition, and the vagaries of winter heating demand play a big role in the balance. The last two winters have been relatively mild, sparing the market from big drawdowns. But several supply-side factors at play could threaten that balance should things get colder this season. The EIA listed several key factors.
Limited LNG supply growth
Most new supply will come from the U.S., specifically Corpus Christi, Texas, and Plaquemines, Louisiana. Total capacity of new U.S. LNG projects is 1.7 billion cubic feet per day (Bcf/d). But, the EIA pointed out, "during the initial start-up phase, new LNG export projects operate below nominal capacity and require several months to reach full production," which could significantly reduce the amount of LNG actually going to market.
Any supply issues, unplanned outages or geopolitically-related shipping interruptions could diminish expected LNG output as well.
Russia-Ukraine Pipeline Contract Ending
Europe's gas supply from Russia might decrease if the Russia-Ukraine natural gas pipeline contract is not renewed by the end of this year. This could create new demand for U.S. LNG if supply and export capacity is available.
Colder Winters Possible
As El Niño changes to La Niña in the Pacific Ocean, Northern Hemisphere winter weather patterns could get colder. Should that happen in North America, a rise in natural gas demand here could reduce inventories and therefore raise prices at Henry Hub and for LNG to be exported. And colder weather in Europe or Asia could boost demand there, creating competition for imports, further raising prices.
Any increase in demand for LNG in the Southern Hemisphere, such as Brazil or Egypt, could exert further pressure on supply and spot prices. While it is summer there, LNG is still an important part of those regions' energy mix.
Increasing Use of Natural Gas in Power Generation
LNG's use as a baseline power generation fuel could be affected by availability of renewable energy, nuclear restarts and supply/price issues of LNG itself.
Mild Winters in Europe and Asia Minimized Heating Demand Last Winter
Ending winter 2023-24, Europe had record high natural gas storage levels. EU-wide demand reduction measures last winter were extended to cover this winter. The EIA credited those measures with cutting natural gas usage by around 15% in the winter of 2023-24.
China and Europe: The Balance
This chart below shows that during the period from March 2024 to March of 2025, global import capacity was increasing by 10 Bcfd while export capacity was rising by only 3 Bcf/d, illustrating one aspect of supply concerns. The U.S. is adding just over half of that new capacity (1.7 Bcf/d). On the import side China, India and Germany are leading the way.
Click on the image at right for an EIA chart showing global LNG export and import capacity and additions.
Mild European weather in the fall has led to that region's natural gas storage being near capacity right now, the EIA reported.
"In China, where natural gas storage capacity can meet about 12% of the country's annual natural gas consumption, record LNG imports from August to October 2024 may indicate strong refill of storage inventories ahead of winter," the EIA said.
Export storage is also strong at this time. "In the United States--the world's largest LNG exporter--storage inventories were close to maximum volumes as of November 8, exceeding last year's inventories by 3%," the EIA noted.
These numbers show that the season is at least starting off in a strong supply position, although a winter storm caused the EU to draw down 4 billion cubic meters (Bcm) from storage over the last two weeks.
Stateside, Industrial Info's Geoffrey S. Lakings said the U.S. "saw a run-up in price last week as some severe winter storms hit the Eastern Seaboard as well as the Rockies."
Lakings added, "This shows that, under the right conditions, current supply sufficiencies could quickly evaporate (think if we have three Winter Storm Heathers (2023) or Uris (2021)."
And should Russian export contracts be allowed to die, it could create a sudden supply jolt, signaling higher prices, at least for futures, in rapid succession.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
Supply-demand balances are always delicate for natural gas and LNG due to their importance in energy security and the energy transition, and the vagaries of winter heating demand play a big role in the balance. The last two winters have been relatively mild, sparing the market from big drawdowns. But several supply-side factors at play could threaten that balance should things get colder this season. The EIA listed several key factors.
Limited LNG supply growth
Most new supply will come from the U.S., specifically Corpus Christi, Texas, and Plaquemines, Louisiana. Total capacity of new U.S. LNG projects is 1.7 billion cubic feet per day (Bcf/d). But, the EIA pointed out, "during the initial start-up phase, new LNG export projects operate below nominal capacity and require several months to reach full production," which could significantly reduce the amount of LNG actually going to market.
Any supply issues, unplanned outages or geopolitically-related shipping interruptions could diminish expected LNG output as well.
Russia-Ukraine Pipeline Contract Ending
Europe's gas supply from Russia might decrease if the Russia-Ukraine natural gas pipeline contract is not renewed by the end of this year. This could create new demand for U.S. LNG if supply and export capacity is available.
Colder Winters Possible
As El Niño changes to La Niña in the Pacific Ocean, Northern Hemisphere winter weather patterns could get colder. Should that happen in North America, a rise in natural gas demand here could reduce inventories and therefore raise prices at Henry Hub and for LNG to be exported. And colder weather in Europe or Asia could boost demand there, creating competition for imports, further raising prices.
Any increase in demand for LNG in the Southern Hemisphere, such as Brazil or Egypt, could exert further pressure on supply and spot prices. While it is summer there, LNG is still an important part of those regions' energy mix.
Increasing Use of Natural Gas in Power Generation
LNG's use as a baseline power generation fuel could be affected by availability of renewable energy, nuclear restarts and supply/price issues of LNG itself.
Mild Winters in Europe and Asia Minimized Heating Demand Last Winter
Ending winter 2023-24, Europe had record high natural gas storage levels. EU-wide demand reduction measures last winter were extended to cover this winter. The EIA credited those measures with cutting natural gas usage by around 15% in the winter of 2023-24.
China and Europe: The Balance
This chart below shows that during the period from March 2024 to March of 2025, global import capacity was increasing by 10 Bcfd while export capacity was rising by only 3 Bcf/d, illustrating one aspect of supply concerns. The U.S. is adding just over half of that new capacity (1.7 Bcf/d). On the import side China, India and Germany are leading the way.
Mild European weather in the fall has led to that region's natural gas storage being near capacity right now, the EIA reported.
"In China, where natural gas storage capacity can meet about 12% of the country's annual natural gas consumption, record LNG imports from August to October 2024 may indicate strong refill of storage inventories ahead of winter," the EIA said.
Export storage is also strong at this time. "In the United States--the world's largest LNG exporter--storage inventories were close to maximum volumes as of November 8, exceeding last year's inventories by 3%," the EIA noted.
These numbers show that the season is at least starting off in a strong supply position, although a winter storm caused the EU to draw down 4 billion cubic meters (Bcm) from storage over the last two weeks.
Stateside, Industrial Info's Geoffrey S. Lakings said the U.S. "saw a run-up in price last week as some severe winter storms hit the Eastern Seaboard as well as the Rockies."
Lakings added, "This shows that, under the right conditions, current supply sufficiencies could quickly evaporate (think if we have three Winter Storm Heathers (2023) or Uris (2021)."
And should Russian export contracts be allowed to die, it could create a sudden supply jolt, signaling higher prices, at least for futures, in rapid succession.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
