What happens if Russia cuts European natural gas?

But while storage levels remain low and prices high, Europe is not running out of fuel. Market forces are working, albeit belatedly. An...


But while storage levels remain low and prices high, Europe is not running out of fuel.

Market forces are working, albeit belatedly. An armada of giant ships brought in shipments of liquefied natural gas, which is gas cooled into liquid form, lured by high prices and cajoling from the Biden administration. Ships come from the United States and elsewhere, and a single tanker can hold the equivalent of three times the current daily transit volumes between Russia and Ukraine.

The surge was significant: in January, flows of liquefied natural gas to Europe actually exceeded those of Russian gas. These expeditions, along with a relatively mild winter so far, have at least temporarily allayed fears of a shortfall.

“There is less risk of running out of gas,” said Massimo Di Odoardo, vice president for gasoline at Wood Mackenzie, a market research firm. “Worries about power outages are becoming less and less important.”

Mr Di Odoardo said another reason for the drop in Russian gas flows to Europe in January is that European utilities, at currently high prices, are choosing to sell the gas they have in storage, rather than buying from Russia.

It is doubtful that liquefied natural gas shipments can compensate for a complete shutdown of Russian gas to Europe. Liquefied natural gas transporters require special terminals, and Europe probably does not have enough receiving terminals to cope with such huge losses.

“Import capacity in Europe is currently being tested, so the region would struggle to take much more,” said Laura Page, an analyst at Kpler, a research firm.

Probably worse. The show of force at the Ukrainian border “is going to damage them commercially in the market,” said Trevor Sikorski, an analyst at Energy Aspects, a research firm.

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Newsrust - US Top News: What happens if Russia cuts European natural gas?
What happens if Russia cuts European natural gas?
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