EU gas stocks at their lowest since 2022, prices surge

Unusually cold weather in January led to the fastest rate of withdrawals from gas stored in European facilities in the past 5 years. Gas prices are rising in response to the situation. For example, the price of the front-month contract at Europe’s most liquid trading hub, TTF, rose by more than 30% during January. 

European countries are withdrawing more natural gas from storage facilities due to the cold weather this winter than in previous winters. According to data published by Bloomberg, an average of 7.8 TWh of natural gas was withdrawn from storage facilities per day in January.

As a result of high withdrawal rates, European gas storage levels have fallen well below 50% and are at their lowest for this time of year since 2022, when Russia launched its invasion of Ukraine.

Natural gas stocks in Czech storage facilities are slightly higher than the EU average, but they too have already fallen below the 50% threshold. As with the overall EU figures, the situation in Czechia was last worse in 2022.

Wood Mackenzie analysts expect gas stocks in European storage facilities to fall to as low as 20% by the end of winter.

Growing reliance on LNG imports

Bloomberg noted that Europe has already shed a large share of its pipeline supplies from Russia in recent years. They fell further at the beginning of this year after gas supplies through Ukraine ended. A full ban on imports of Russian gas is set to take effect from November 2027.

Europe must therefore increasingly rely on imports of liquefied natural gas (LNG). While these have remained at high levels in recent months, this has not been enough to reverse the situation.

According to data published on Energostat, roughly 130 TWh of LNG was delivered to the EU in January, about half the volume of natural gas withdrawn from storage facilities over the same period.

"Natural gas withdrawals from storage are not driven solely by cold weather, but also reflect the economic advantage of using stored gas versus importing flexible LNG supplies," said Patricio Alvarez, a senior analyst at Bloomberg Intelligence, adding that LNG imports are less attractive at the high spot prices currently seen on the market.

Natural gas prices on European markets are rising in response to the situation. For example, the price of the contract for gas delivery in the following month at Europe’s most liquid trading hub, TTF, rose by more than 30% in January and is currently around EUR 40/MWh.

According to David Lewis of Wood Mackenzie, the situation could improve with a new wave of LNG supplies set to reach the market in spring this year. This should in turn allow European storage facilities to be replenished at the fastest pace in the past 5 years.