Energy Security Trumps Price as Geopolitics Shake Natural Gas Market
The natural gas market is experiencing significant changes due to geopolitical conflicts and supply chain disruptions. According to experts, the era of 'energy security' is solidifying, prioritizing stable supply over price. This shift is most pronounced in the natural gas market, where European Union's inventory rate is far below average at 65%, compared to 82% in previous years.
The Iranian war has led to skyrocketing gas prices, preventing sufficient inventory buildup during summer months when prices are relatively low. It is estimated that Europe will need over 100 terawatt-hours of gas to prepare for winter, worth approximately 7 billion euros or 11 trillion won at current prices.
As a result, the gas markets in Europe and East Asia are synchronizing, with Europe competing with East Asian countries like Korea and Japan for LNG supplies. The TTF (European natural gas price indicator) and JKM (East Asian LNG spot price indicator) have more than doubled since late February, when the Middle East war began.
Analysts warn that supply disruptions from the Middle East could lead to even higher prices in Europe, potentially exceeding 75 euros per MWh this winter. However, experts note that it is challenging to increase supply rapidly due to damaged production facilities in Qatar and transportation disruptions in the Strait of Hormuz.