Europe has sharply increased the withdrawal of gas from its storage facilities

European consumers sharply increased the average daily gas withdrawal from underground gas storages (UGS) at the end of January 2023 – more than tripled compared to the first half of the month and almost doubled compared to December 2022, according to data from the storage operators association Gas Infrastructure Europe (G.I.E.).

According to GIE, gas withdrawals from European UGSFs began to grow at the end of the second decade of January 2023. According to Vedomosti’s calculations, in December, withdrawals averaged 402.4 million cubic meters. m per day, in the first half of January decreased to an average of 213 million cubic meters. m per day, then slightly increased – the average from 1 to 18 January amounted to 263 million cubic meters. m per day.

But for the period from 19 to 25 January (latest available data), gas consumption rose sharply, reaching 693 million cubic meters. per day. During this time, UGS occupancy decreased by more than 5 p.p., from 80.1% to 74.8%. As of January 25, there were 76.7 billion cubic meters in European UGSFs. m of gas. Over the past week, stocks have decreased by 10 billion cubic meters. For comparison: about the same amount of fuel was withdrawn for the whole of December 2022 (10.2 billion cubic meters).

Analysts interviewed by Vedomosti note that a combination of three factors led to an increase in gas withdrawals from European UGSFs – cooling, redirection of liquefied gas (LNG) cargoes to Asia against the backdrop of lower prices in Europe (that is, an “Asian premium” formed in the price) and weak wind generation indicators, which forces Europeans to load blocks of gas-fired thermal power plants.

In December 2022 and the first two decades of January 2023, warm weather was observed in Europe (on some days the temperature exceeded the climatic norm by 15 degrees or more). Due to the lack of snow, some ski resorts in the Northern Alps and the French Pyrenees were even closed, Euronews reported. But at the end of January, a cold snap came to most of the EU, the average daily temperatures dropped to average levels, and in some countries even 3-4 degrees below normal. In Spain, the air temperature dropped to negative values, while Austria, Slovenia and Croatia were hit by snowstorms that caused power outages.

At the same time, the price of gas in the EU is still at a relatively low level compared to last year: according to the ICE exchange, February gas futures on the TTF hub in the Netherlands traded at about $600 per 1,000 cubic meters on January 27. Prices in Asia are now higher: based on the Platts index as of January 26 and Vedomosti’s calculations, they exceed $700 per 1,000 cubic meters. m. This makes supplies to Asia more profitable for LNG exporters.

Contributes to the increase in the selection of gas from storage facilities in Europe and the decline in the production of wind farms in the EU. According to the WindEurope Association, windmill generation in the third decade of January provides from 10.4% to 17.6% of the EU energy balance against 16.5%-35.4% in the first two decades of this month.

Igor Yushkov, a leading analyst at the National Energy Security Fund, notes that, in addition to these factors, the growth in gas withdrawal from UGS facilities was affected by the fact that, in the conditions of a high level of reserves, European traders began to fear a further price reduction and decided to sell part of the available fuel volumes instead of importing new volumes of LNG .

Analyst FG “Finam” Sergei Kaufman points out that the volume of Russian gas supplies to the EU is very small, so the Europeans will have to spend gas from underground storage facilities “faster than usual.” According to him, the EU will have to raise prices for LNG in order to pull free volumes of gas from the Asian region. Given the recovery in demand in China, according to the analyst, this will support gas prices, which will again rise to $800 per 1,000 cubic meters. m.

If in February gas in Europe starts to rise in price, “Gazprom” may restore transit through Ukraine to December levels (from the current 24.2 million cubic meters per day to 41-43 million cubic meters – Vedomosti), as Russian fuel becomes more competitive in terms of price.

Senior analyst “BCS The world of investments” Ronald Smith notes the importance of the weather factor, which will continue to influence the quotes: “But for now, according to weather forecasts, warmer and windier weather is expected on Sunday,” he adds. The increase in Gazprom’s deliveries to the EU will also depend on weather conditions, Smith states.