EU gas storage facilities are over 90% full

The volume of reserves in the European underground gas storage facilities (UGS) of the European Union (EU) has exceeded the target level of 90% of their total capacity, follows from the data of the association of European storage operators Gas Infrastructure Europe (GIE). The EU planned to reach it by November 1, but did it more than two months earlier.

According to Vedomosti’s calculations based on GIE information, as of August 16 (latest available data), there were 98.9 bcm in European UGSFs. m of gas. Vaults were 90.12% full, up 15% from August 16, 2022 and 14% above the five-year average on the same date.

The maximum level of occupancy of storage facilities was recorded in Spain – 99.98%. In Germany, which has the largest gas storage capacity in the EU, the level of reserves reached 91.79%, in Austria – 90.71%, Italy – 90.62%, the Netherlands – 92.93%, in France – 84.04% . The minimum level of UGS occupancy is observed in Latvia – 77.33%.

On June 27, 2022, the Council of the EU approved a regulation on the filling of UGS facilities, according to which, starting from 2023, by November 1, the storage facilities of the EU member states must be filled at least 90%. According to GIE, by the start of the 2022/23 heating season, which began on November 13, 103.3 bcm had been pumped into European UGSFs. m of gas (the level of occupancy was 95.6%). The average UGS occupancy rate at the beginning of the season over the past five years was 98.1 billion cubic meters. m or 90.7%.

The 2022/23 heating season in Europe ended on 6 April. Due to warm winter weather and a general decline in demand for gas, the EU ended it with a record 60.3 billion cubic meters of fuel in storage. m. This is more than twice the volume at the end of the previous heating season and almost 1 billion cubic meters. m (1.6%) more than the previous record value recorded in 2020. UGS occupancy rate at the end of the heating season was 55.4%.

Thanks to a stable situation with gas reserves in Europe, gas prices began to fall in price from August 2022, while peak prices in the spring of last year reached $3,900 per 1,000 cubic meters. m. The decline in prices accelerated in December and continued after the end of the heating season. On May 10, 2023, gas in the European market, according to the ICE exchange, for the first time since July 2021, cost less than $400 per 1,000 cubic meters. m. On May 25, quotes fell below $300 for the first time since January 2021. Then prices corrected upwards. Growth, in particular, was observed in early August against the background of the threat of strikes at plants for the production of liquefied natural gas (LNG) in Australia, which is the largest exporter of LNG. The workers are demanding higher wages. On August 18, September futures on the TTF hub are trading in the range of $402-433 per 1,000 cubic meters. m.

Lead Analyst “Opening Investments» Andrey Kochetkov notes that the warm winter of 2022/23 was the main factor that allowed the EU to reach the target UGS filling level ahead of schedule. “Hot European summer, which is traditionally accompanied by increased gas consumption [электростанциями] due to the growth in energy consumption for air conditioning, was offset by the industrial decline in the EU,” he adds. Senior analyst Alfa Bank Nikita Blokhin also considers the decline in demand for gas from the European industry to be an important factor.

According to Senior AnalystBCS The World of Investment” by Ronald Smith, while maintaining the current rate of gas injection, by September 1, European storage facilities should be 95% full. Blokhin believes that European companies, as far as technically possible, will continue to pump gas into storage facilities, the filling rate of which will approach 100% by the beginning of the heating season.

Smith also points out that European companies pump certain, albeit small, volumes of gas into gas storage facilities in Ukraine. On August 16, Minister of Energy of Ukraine German Galushchenko said that 600 million cubic meters of gas are stored in the country’s underground storage facilities. m of gas from European companies.

According to Blokhin, the filling of storage facilities may lead to a decrease in the supply of liquefied natural gas (LNG) to the European Union. Smith predicts that the EU will reduce the volume of LNG imports in the next two to three weeks. He notes that as hot summer weather turns into warm autumn weather, the demand for electricity will decrease, followed by the demand for gas from thermal power plants. This, in turn, should cause a correction in European gas prices, provided that there are no strikes at LNG plants in Australia, the analyst said.

According to Blokhin, gas prices in Europe will soon return to the range of $300-400 per 1,000 cubic meters. m, but high volatility will continue. At the same time, in his opinion, this will not significantly affect European pipeline imports, in particular, supplies from Gazprom: pipeline gas is now outperforming more expensive LNG.

Smith notes that Europe lost in 2022-2023. about 75% of the total gas supplies from Russia. If the temperature in winter is lower than usual, by the end of the heating season, stocks in UGS facilities may be critically low, he warns. In winter, gas prices in Europe, according to Smith, could rise “well above” $600 per 1,000 cubic meters. m. Kochetkov does not rule out that in the event of a high consumption of reserves and force majeure, prices can reach $ 2000-3000 per 1000 cubic meters. m.