EU countries cut gas demand by a quarter in November even as temperatures fell, in the latest evidence that the bloc is succeeding in reducing its reliance on Russian energy since Moscow’s full-scale invasion of Ukraine.
Provisional data from commodity analytics company ICIS showed gas demand in the EU was 24 per cent below the five-year average last month, following a similar fall in October.
European countries have been trying to pare back their reliance on Russian gas and oil by finding alternative sources or making changes to curb demand.
They have been helped by an unseasonably warm autumn, although in the past two weeks temperatures have dropped closer to normal levels.
In Germany and Italy, the EU’s two largest gas-consuming countries, demand fell 23 and 21 per cent respectively in November, ICIS found. In France and Spain it dropped more than a fifth and in the Netherlands by just over a third.
“Industry is proportionally driving the biggest reductions in gas consumption, and this is entirely the result of clear market pricing,” said Tom Marzec-Manser, lead European gas analyst at ICIS. The high gas price had “disincentivised” use, he added. In 2021, the EU imported 155bn cubic metres of natural gas from Russia, accounting for about 45 per cent of EU gas imports and close to 40 per cent of its total gas consumption.
Europe has also imposed sweeping new restrictions on Russia’s oil exports to limit its use of that energy source too.
The EU’s bar on seaborne Russian oil imports came into effect on Monday. G7 leaders, meanwhile, have agreed to launch a so-called price cap that aims to keep Russian oil flowing to countries such as India and China to avoid creating widespread shortages, but only if the crude is sold at less than $60 a barrel to crimp Moscow’s revenues.
Industry executives and analysts have warned, however, that without further declines in demand and more imports of LNG, gas shortages could persist for years in Europe.
“Demand will need to be lower than pre [Russia-Ukraine] war levels to get enough inventory” for next winter, said Alex Tuckett, head of economics at consultancy CRU Group. “The question is, how much demand reduction, and how painful it will be.”
The drop in demand meant gas storage facilities in the EU were at 95 per cent capacity in mid-November, according to industry body Gas Infrastructure Europe, close to an all-time high. Record inflows of LNG into the region also helped.
But colder weather in recent weeks has increased demand and storage facilities are now at about 93 per cent capacity.
At the same time, prices have risen. Dutch TTF gas futures, the benchmark European contract, are trading near €150 a megawatt hour, the highest in more than a month, but still only half the €300/MWh they briefly reached in August.
Higher gas prices are a burden on households and businesses, but they have enabled Europe to attract record volumes of LNG because of the premium it pays over other buyers.
ICIS data showed that Europe and the UK imported 11.14mn tonnes of LNG in November, a record monthly high, and are on course to receive 12.2mn tonnes in December.
Marzec-Manser added a note of caution on Europe’s planned cap on gas prices.
“Any move to cap wholesale gas prices could jeopardise Europe’s ability to secure [LNG] supply, not just this winter, but for next winter and beyond,” he said. “If Europe [is] not the premium global gas market it would lead to a reduction in imported cargoes at a time when they are needed most.”