Europe is racing to stockpile oil and natural gas before imposing stricter sanctions on Russian energyshows the dash to reorganize the global energy supply after the war in Ukraine.
According to cargo tracking company Vortexa, liquefied natural gas import terminals received a record amount of supercooled fuel for the time of year in April. Meanwhile, oil imports from suppliers Non-Russian levels hit their highest levels since the start of the pandemic.
Governments and companies are preparing for a slowdown in Russian imports by looking for alternative sources in the US, Africa, the Middle East and Asia – as well as squeezing supply from Europe itself.
The hunt for new supplies is a boon for energy companies that can sell into Europe’s hungry market at historically high prices. Immediate beneficiaries include commodity traders, US LNG exporters, West African crude oil producers and Indian refiners.
Europe is ramping up supplies first a possible embargo on Russian oil and the possibility of being cut off from Moscow’s gas exports. Both steps would recreate Russia’s affordable energy-powered economy dating back to the Cold War. Berlin says 12% of Germany’s oil imports now come from Russia, down from 35% before the February 24 invasion.
Among the winners:
announced $6.2 billion in basic profit for the first quarter on Tuesday after removing the fee of 25.5 billion dollars from the decision to leave Russia.
CEO Bernard Looney said BP has sent 55 LNG shipments into Europe in the past five months, a frenzy for the company’s gas traders. Meanwhile, the company’s four European refineries are digging for money because the fuel prices they sell are higher than the crude they buy.
“The industry margins have been strong since the invasion,” said Chief Financial Officer Murray Auchincloss.
Competition in Europe is driving up prices for consumers in the US. Natural gas futures have more than doubled this year and diesel contracts have skyrocketed 80%, adding to the inflationary pressures that the Federal Reserve is trying to address with higher interest rates.
Companies and governments are looking to lock in supply in the long run.
This week said it had signed a 15-year agreement to supply LNG from its Brownsville, Tx-based LNG export project.
starting in 2026.
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The deal marks a turning point for the French power company, which has halted negotiations over a billion-dollar contract to buy NextDecade’s gas by the end of 2020 due to concerns about the environmental impact. field of the smelting process.
Europe separates from Russian energy accelerated in recent weeks. The European Union is finalizing a deal to end Russia’s oil purchases, possibly by the end of the year. Shipments have been on a downward trend as sanctions on state-owned manufacturers
rock in mid-May.
The gas market is a bigger worry. Officials and analysts say Gazprom may cut supply elsewhere in Europe after turn off the faucet for Poland and Bulgaria last week. The giant manufacturer said it had not received the ruble payment required by a Kremlin decree.
To prepare for a future without Russian gas, Europe is importing more from afar. David Wech, chief economist at Vortexa, said suppliers in North America and Africa were involved, shipping 81% and 25% of LNG to Europe, respectively, compared with a year ago. The rise has helped boost shares of LNG exporters such as
up 38% this year and
increased by 68%.
Laura Page, senior analyst at ship-tracking company Kpler, said French LNG imports hit a record high of 2.4 million tonnes in April. Dutch and Belgian imports also rose to their highest levels. all-time, while UK imports hit the second highest on record.
There is a limit to how much LNG Europe can suck in, with tankers fully booked and import terminals at capacity. According to Spark Commodities, a sign of congestion: The price of gas in North West Europe has risen above the price of imported LNG.
Analysts and shipbrokers say analysts and traders who control slots at import terminals can profit from the spread by buying LNG at a relatively low price and selling it at a higher price. higher.
In the oil market, Europe’s crude oil imports from Africa rose by half a million bpd from January through January 16, according to Vortexa, while imports from North America and the Middle East rose 300,000 bpd. / day.
Meanwhile, diesel comes from refineries in India and the Middle East. The conflict has exacerbated a months-long fuel shortage caused by Europe’s reliance on Russian refineries when it pushed drivers to use diesel-powered cars in the 2000s.
One challenge in attracting diesel imports from distant markets is that spot prices have risen several months ahead of futures prices. Commodities depreciate on the go, said Eugene Lindell, an analyst at FGE, an energy consulting firm.
Josu Jon Imaz, managing director of the Spanish oil company: “What is happening now in the face of diesel shortages in Europe will be a challenging task for the global refining system. bridge.
told analysts at the end of April.
Write to Joe Wallace at [email protected]
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