EU reaches 90% gas storage filling target well ahead of winter

The EU reached its 90% gas storage target on Aug. 19, 11 weeks ahead of the EU-mandated Nov. 1 deadline, data from Gas Infrastructure Europe showed Aug. 21.

The target was reached thanks to a mild 2023-24 winter, which left EU stocks still 58.5% full as of the end of March, weak European gas demand and continued strong Norwegian deliveries.

The setting of mandatory filling targets was part of the EU's response in mid-2022 to the gas crisis and record prices triggered by curtailed Russian exports.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26, 2022.

Prices have come down since then thanks to the strong storage levels and demand curtailments but remain relatively high due to supply concerns, with Platts assessing the TTF month-ahead price at Eur37.86/MWh on Aug. 20, according to Commodity Insights data.

The EU's move to enforce mandatory filling highlighted the increasingly strategic importance of Europe's gas storage capacity, which previously had also been used as a market tool to leverage summer-winter price spreads.

Spreads have been narrower this summer compared with 2023, but injections have mostly tracked last year's rate nonetheless. Stocks hit the 90% target last year on Aug. 16, 2023.

"For now, it is pretty much the same scenario as last year," a Netherlands-based trader said. In 2023, EU stocks hit a peak of 99.7% of capacity on Nov. 5.

Commodity Insights analysts see gas storage sites in Northwest Europe, Italy, Spain and Central and Eastern Europe peaking at 100% full by the end of October.

However, storage fullness varies by country, with stocks in Spain more than 100% full as of Aug. 19, while Latvia's only storage site was filled to just 69% of capacity.

Norway maintenance

Recent filling also came ahead of the prolonged Norwegian maintenance, which is due to remove significant capacity through all of September.

Any extended maintenance in Norway and a continued trend of lower LNG imports could limit the EU's ability to reach 100% fullness.

"It all depends [on] what Norway does in terms of extending its planned maintenance," a UK-based trading analyst said when asked if European stocks would hit tank-top.

In the recent past, operators have extended the end of planned maintenance work at Norwegian assets due to unforeseen issues, sometimes on a daily basis. One example is the work at the giant Troll field last summer. All of Troll's 125 million cu m/d of capacity was taken offline on Aug. 26 last year for maintenance, initially expected to end Sept. 7 but was delayed multiple times until output finally resumed Sept. 20.

A Switzerland-based trader also said 90% fullness will likely not be enough to calm the market in the event of a very cold winter.

"We will mentally need to reach [more than] 95% for people to feel relatively comfortable," the trader said. "If we don't, then we start to see people trying to outprice Asia."

Asian spot LNG prices have traded at a steady premium to European prices through 2024, pulling cargoes to Asia and away from Europe.

German warning

German industry group INES also warned last month that in the event of extremely cold temperatures, Germany's storage sites will be completely emptied by the beginning of February 2025.

"We are not out of the woods yet," INES managing director Sebastian Heinermann said. "The security of gas supply that we were used to before the energy crisis has not yet been fully restored in Germany. Consumption savings will therefore remain a relevant issue in the coming winter."

Last year, traders also turned to Ukraine to store gas as European sites filled, but the trend has not been repeated so far this year.

Ukrainian officials said some 2.5 Bcm of gas was stored in Ukraine by foreign traders in 2023, but traders have been net withdrawing from Ukrainian storage sites this year, according to Commodity Insights analysis.

As of the beginning of August, Commodity Insights estimated that stocks held under the customs warehouse rule had dropped to just 0.27 Bcm.

"We expect the stocks will further decrease to about 0.15 Bcm by the end of the injection season," it said.