EU gas storage withdrawals highlight winter supply risks

EU gas storage sites have turned to net withdrawals as colder weather, lower wind power output and reduced LNG inflows increase demand for stored gas. The early shift highlights the European market’s exposure to weather conditions and the potential for storage levels to fall quickly this winter.

Winter is certainly coming and European storage sites turned to net withdrawals last week, with almost 0.4 bcm of gas taken out of storage sites since 28 October. This is in contrast to historical trends, with the five-year average showing positive net injections of 0.25 bcm for the same period.

Colder weather, together with lower wind power output and reduced LNG inflows, is increasing the call on gas storage sites, which are acting as a key flexibility provider and safety buffer over the heating season.

It is obviously too early to draw any conclusions, but the sharp turn to storage draws shows how much the European market is at the mercy of weather conditions.

Storage levels can deplete fast, especially in a context of limited LNG supply (see the IEA’s Global Gas Security report).

What is your view? How will storage levels evolve this winter? Do you see any risks in the second half of the heating season? What could this mean for price volatility?

Source: Greg Molnar (LinkedIn)