What's going on?
Data out this week showed that Europe’s already closing in on its gas storage targets.
What does this mean?
Russia’s been cutting the amount of natural gas it sends into Europe for months, and that supply’s about to drop even lower as the Nord Stream – one of the main pipelines between Russian and Europe – undergoes unexpected maintenance starting this week. But Europe’s been preparing for this: the region upped the minimum required level of its reserves earlier this year, and it’s been building those stockpiles as fast as it can. After all, those reserves typically provide around 30% of the fuel used during frosty European winters – and they’ll probably account for even more now there’s less imported gas to go around. While hoarding gas won’t solve all of Europe’s energy problems, it’s still good progress: European Union reserves were filled to nearly 80% last week, meaning the region’s hit its November target a whole two months early.
Why should I care?
The bigger picture: China’s trash is Europe’s treasure.
Europe did benefit from a stroke of good luck: China’s sputtering economy has pushed the world’s biggest buyer of liquefied natural gas to sell off surplus supplies, and Europe jumped at the chance to buy some for its reserves. But recent history’s warned the region against depending on one supplier, so it’s been trying to upgrade its own renewable energy infrastructure and bolster its energy imports from the Middle East and US as well.
For markets: Good news, bad reaction.
News of healthier-than-expected supplies sent Europe’s natural gas prices plunging by the most since March, a welcome change from their steep incline over the last few months. Mix that with data out on Tuesday that showed inflation expectations at their lowest since spring, and that’s, uh… still not enough to put a smile on dejected European faces. In fact, consumers and businesses are the most pessimistic they’ve been about Europe’s economic outlook since the Covid-ridden January 2021.