EU gas storage on track for lowest fill level since 2013

EU gas storage is on track to reach its lowest end-of-injection-season fill level since 2013, as weak commercial incentives continue to constrain injections.

Europe’s storage filling is on track to its lowest since 2013, with current injections trends sufficient to reach just 73% fill levels – well below the EU’s 80-90% target.

The European gas injection season typically starts in April and is supported by the seasonality of future gas prices, which usually tend to be higher in the winter than in the summer.

However, this year is different: tight short-term supply fundamentals are keeping the summer gas prices at a premium to winter contracts. This might also reflect market participants’ expectation that Hormuz will reopen for the winter.

All in all, seasonal price spreads on TTF averaged at minus €1.5/MWh since the beginning of April, which naturally reduced the commercial incentive for storage filling.

Storage injections were down by almost 20% (or 7.5 bcm) compared to last year, deepening the EU’s storage deficit. Inventory levels are currently standing 20% (or 17.5 bcm) below their five-year average.

If current injection trends continue, EU storage levels would reach just 72 bcm – standing 20% (or 19 bcm) below their five-year average. This would be also the lowest fill level since 2013 and well below the EU’s 80-90% target.

Low storage levels are naturally increasing the risk of heightened winter price volatility, which could be accentuated by tight supply fundamentals and weather factors such as cold spells or slow wind patterns.

Source: Greg Molnar