There are signs that the Northern Hemisphere could experience another colder than usual winter and with European gas stocks at their lowest level in eight years, there’s a very real chance that prices will surge once again.

Reuters reported that average daily temperatures in Frankfurt, Germany, have been below the long-term seasonal average for 11 of the past 14 days while the Asahi Shimbun noted a month ago that the apparent La Nina weather phenomenon meant that Japan could expect an especially cold winter.

According to Gas Infrastructure Europe, gas stocks in the European Union and Britain fell to just 742 terrawatt hours earlier this month, the lowest for this time of the year since 2013.

This means that storage facilities are just 66% full, which is insufficient to last until the middle of January even during an average winter.

What this means is that any supply disruption or weather event will likely send Europe scrambling for more gas to fill their gas stocks, which will likely drive prices higher.

In stark contrast, East Asian inventory levels are at or above the five-year averages thanks to a scramble earlier this year to lock in LNG supplies, though they too will likely need regular topping up to guard against unexpected developments.

LNG is a big winner while domestic gas prices rise

Australian LNG players are already benefitting from the strong demand for gas with EnergyQuest reporting that at least one east coast project is reported to have sold two spot cargoes in November at the North East Asian price, which could be worth over $180m each.

While domestic spot prices remain lower than international spot prices of about $40 per gigajoule, east coast prices have nonetheless increased in November to $10-$13/GJ.

Prices on the West Coast have also climbed with wholesale prices rising 7% higher quarter on quarter in the third quarter of 2021.

And this is a trend that’s likely to continue despite the federal government’s best efforts with its so-called gas-led recovery as existing producing fields continue to decline.

While new developments in the Perth Basin, Beetaloo Sub-Basin, North Bowen and other areas are likely to provide at least some relief, they will require at least some lead time before they enter production.

There’s also a better than even chance that the potential to make big margins will see east coast LNG exporters scramble to fill their plants as close to capacity as possible to deliver more spot cargoes, a move that could be detrimental to domestic gas buyers.