Gas Market Uncertainty "Unprecedented" Amid Russian Supply Cuts - IEA

By Scott Kanowsky 

Investing.com -- Gas markets face "unprecedented" uncertainty this winter and into 2023 as dwindling levels of key Russian supplies drive up prices and disrupt trade flows, according to a new report from the International Energy Agency on Monday.

The IEA predicted a 0.8% global gas consumption decline this year, driven mainly by a record contraction in Europe, which the group described as "directly exposed" to further Russian supply cuts.

An analysis by the IEA of the resilience of Europe's gas market showed that storage levels would be under heavy pressure early next year if Russia completely shuts down supplies on November 1 and the European Union does not take steps to curb demand.

According to the study, if the amount on hand of liquefied natural gas - which has seen a surge in sales in Europe as Russian flows decrease - were high, storage in the EU would be less than 20% full in February. However, if LNG imports were low, reserves would be closer to only 5%.

Should storage slump to these levels, the risk of supply disruptions due to a late winter cold snap would increase, the IEA said.

"Security of supply has become a top priority in Europe and other importing regions as a total cut-off in Russian flows to Europe cannot be ruled out, creating further tensions and demand destruction for all competing LNG importers," the IEA wrote in its fourth quarter gas market report.

Future decisions made by the Kremlin, which have stemmed westward flows in response to sanctions imposed on it following the outbreak of the war in Ukraine, have also created major tensions that may carry over into next year, the IEA said. Gas consumption worldwide is forecast to grow by only 0.4% in 2023.

In a statement, Keisuke Sadamori, the IEA's director of energy markets and security, added that Moscow is causing "significant harm" to consumers, businesses, and economies not only in Europe but also in emerging and developing economies.

"The outlook for gas markets remains clouded, not least because of Russia's reckless and unpredictable conduct, which has shattered its reputation as a reliable supplier," Sadamori said.