EU is drawing down its gas reserves at the fastest pace since the energy crisis

The EU is drawing down its gas storage facilities at the fastest pace since the energy crisis three years ago. The reasons are higher gas consumption due to colder weather and a decline in imports of liquefied natural gas (LNG).

According to data from Gas Infrastructure Europe, the volume of gas in storage facilities across the European Union fell by approximately 19% from the end of September, when the gas market’s injection season ends, to mid-December.

The last time Europe’s gas reserves were drawn down by this much was in 2021, when Russia began restricting supplies to Europe ahead of its invasion of Ukraine.

In the previous two years, the decline over the same period was only in the single digits, as higher-than-usual temperatures kept storage facilities relatively full even during the winter heating season, and consumers cut their consumption because of higher gas prices.

“So far this winter, Europe has had to rely much more heavily on its underground storage than in the past two years to offset lower imports of liquefied natural gas and meet stronger demand,” Natasha Fielding, head of European gas pricing at price reporting agency Argus Media, told the Financial Times.

Europe is also facing greater competition for LNG imports from Asian buyers, who are attracted by lower prices than in previous years. This has led to lower imports into Europe and a greater need to draw gas from storage.

EU storage levels now stand at 75%, slightly above the average for the previous ten years, before the EU began seeking to reduce its dependence on Russian gas. At this point last year, storage levels were close to 90%.

Under the European Commission’s binding target, EU countries must fill their storage facilities to 90% of capacity by early November, although some countries have lower targets.

Impact on gas prices

Gas prices in Europe are still significantly lower than those seen during the energy crisis in the summer of 2022. At the time, natural gas was trading at around EUR 300/MWh. However, drawing down storage during the winter could make refilling it next year more difficult and expensive.

Traders are already trading gas for delivery next summer at a higher price than gas for delivery the following winter, a sign of rising costs to replenish storage.