European gas storage sites are record full at winter’s end, signalling low gas prices

European natural gas storage sites are at record levels of fullness at the end of winter, with more than 50% of their capacity filled this week. The main reasons are increased imports of liquefied natural gas and a relatively warm winter, which has reduced gas consumption in district heating.

Europe entered 2020 with natural gas storage sites filled to record levels. According to data published by Gas Infrastructure Europe (GIE), their fill level was close to 90%. This is the highest figure at least since 2011, when GIE began publishing the data.

Due to the relatively mild winter, storage sites have remained at record levels since the beginning of the year and were still more than 55% full this week. In recent years, the average has stood at around 35%, while in 2018 they were only 18% full at the same point.

The mild winter, which this year has been particularly characteristic of central and northern Europe, has reduced natural gas consumption in district heating. This has been compounded by relatively high natural gas imports, both in the form of LNG and via pipelines.

While imports of liquefied natural gas were relatively low in 2012-2017, they increased significantly towards the end of 2018 and during 2019, primarily from the US. In December 2019 and February 2020, they even averaged 0.4 billion m3 per day, according to calculations by the US Department of Energy, which would mean LNG terminals were operating at approximately 60% utilisation.

Imports via pipelines are also expected to increase. At the start of this year, the TurkStream pipeline, through which Russia supplies southern Europe, was commissioned. The TAP pipeline, which is intended to supply Italy, is also expected to start operating during this year. In addition, the Nord Stream 2 pipeline is nearing completion. Although its commissioning date remains uncertain, it is expected to start operating at the end of this year.

Entering the injection season with storage sites at such high fill levels could have a significant impact on natural gas prices this year and in the following years. Natural gas is currently trading at around 8 EUR/MWh on the spot market, compared with 15 EUR/MWh in the same period last year and more than 2O EUR/MWh a year earlier.

Natural gas is trading at similarly low levels on other European markets. For example, on the TTF, gas traded at just 7.5 EUR/MWh on the day-ahead market.

Prices of longer-term contracts traded on PXE are falling similarly. For example, the annual contract for next year has already dropped to around 12.5 EUR/MWh.