Putin’s Gas Weapon Blunted by Europe’s Stock Build, StanChart Says

Julian Lee, Bloomberg News

HAIDACH, AUSTRIA - AUGUST 04: Picture shows parts of the Haidach underground natural gas storage facility on August 04, 2022 near Haidach, Austria. The German and Austrian governments have agreed to share the site in an effort to strengthen their common energy needs in light of diminishing gas flows from Russia. The Haidach facility, which is among the biggest gas storage sites in Europe, previously supplied southern Germany and western Austria with gas and was not even connected to the gas network for supplying the rest of Austria. The Austrian government has also enacted legislation to seize unused storage capacity at the site from Russian energy company Gazprom, which is a major shareholder of the Haidach site but has curtailed its gas flows there. Both Germany and Austria are still heavily dependent on Russian gas imports but are feverishly seeking alternatives. The Russian government is using energy exports as a means to put pressure on European countries that are supporting Ukraine. (Photo by Alexandra Beier/Getty Images) , Photographer: Alexandra Beier/Getty Images Europe

(Bloomberg) -- Europe’s natural gas stockbuild is running about nine weeks ahead of last year, reducing the leverage available to Russian President Vladimir Putin through his country’s exports to the region.

“EU gas inventories are still building relatively strongly, despite Russia cutting flows through the Nord Stream pipeline to just 20% of capacity,” Standard Chartered analysts including Emily Ashford and Paul Horsnell said in a note dated Aug. 9.

“It was once thought unthinkable that Europe could get through a winter comfortably without Russian gas, but thanks to the strength of the inventory build, we now think it can,” the analysts said. “The power of Russia’s gas ‘weapon’ has deteriorated significantly.”

The European gas injection season should end with about 103 billion cubic meters in storage, which “should provide sufficient insulation even if no more Russian gas flows.” Stockpiles have been building faster than their five-year average rate since the start of July and the build rarely dipped below that benchmark in the previous two months.

Higher imports of liquefied natural gas have helped boost inventories despite a 70% drop in total Russian flows to the European Union. An earlier-than-expected return of the Freeport LNG plant in Texas will provide a significant alternative if the remaining Nord Stream flows are cut.