Gas stocks in Europe reach record levels, prices fall

Natural gas stocks in Europe have reached record-high levels. Combined with currently low demand in October, this has resulted in a drop in natural gas prices, although the forecast cold spell signals a renewed increase. Montel reported.

At the Dutch TTF trading hub, Europe’s most liquid, the price of gas for delivery the following month closed at 115,0 EUR/MWh on Friday, a level last seen in mid-June. The day-ahead contract fell to 62 EUR/MWh.

"Europe has won the battle to fill its storage facilities ahead of winter, having taken in more than 50 billion cubic metres of additional LNG between January and October alone," said ICIS analyst Alex Froley.

According to data from Gas Infrastructure Europe, natural gas storage facilities across Europe were 95% full, five percentage points, or five billion cubic metres, above the five-year average. This also exceeds the European Union’s target of filling storage facilities to at least 80% by 1 November, which was introduced to ensure security of natural gas supplies during the winter period.

"Full storage facilities and unusually mild weather in October caused spot gas prices for short-term deliveries to fall sharply. … However, the market will remain tight throughout the winter and into 2023," Froley added.

German gas storage facilities were 99,3% full as of Friday. Compared with the five-year average, Germany has approximately 30 TWh, or 14%, more gas in storage.

While storage levels in Germany were at record highs, lower temperatures and lower wind power generation forecast for the end of the month would mean rising demand for gas.

Gas prices further ahead also point to this. The price of gas at the TTF trading hub for delivery in the following quarter reached 124 EUR/MWh, representing a 9 EUR premium over the price of gas for delivery the following month. The price of the contract for the following year was also higher, at 123,5 EUR/MWh.

Will Europe have enough gas next year as well?

The International Energy Agency said on Thursday that Europe could face a gas supply shortfall of 30 billion cubic metres next year.

Depending on how cold this winter is, storage levels at the end of this heating season could be between 5 and 35%. As a result, between 60 billion and 90 billion cubic metres of gas would need to be injected during the summer, the IEA said.