LNG in World Markets Featured Article

Europe’s LNG import demand is expected to stay firm this quarter as importers look to replenish underground storage stocks, which have seen heavy draw-downs since December last year.

Market focus is already turning to the summer European reinjection season on expectations that storage levels at the end of the 2024/2025 winter withdrawal season will be lower than previous years.

Stocks have been recently drawn down by the second-largest rate in the past ten years, mainly on a combination of below average temperatures and above average windless days in Germany and across large parts of Europe.

The lack of wind powered generation has cut renewable energy supplies and increased gas-fired power generation demand. The end of Russian piped gas supplies through Ukraine from Jan.1 has also contributed to stock drawn downs, especially in central and eastern Europe.

Total EU underground storage had fallen to 66.3% of available capacity by Jan.11, according to Gas Infrastructure Europe (GIE). Storage levels were at 80.8% of capacity a year earlier. Last year, storage levels dropped to 66% on Feb.10 and stocks continued to fall until June, when purchases started to rebuild storage levels ahead of the 2024/2025 winter.

France’s underground stock levels had fallen to 53.2% of capacity by Jan.11 and the Netherlands was at 50.1%. Slovakia, which was supplied with pipeline gas from Russia through Ukraine, has seen storage fall to 70% of capacity from 75% on Jan.1.

Centrica says storage concerningly low

UK gas company Centrica on Jan.10 warned that UK winter gas storage had reached “concerningly low levels” because of colder-than-usual conditions, high gas power demand and the end of Russian gas transit flows through Ukraine. UK storage sites had fallen to half of capacity and were 26% below the same period last year, said Centrica, which operates the UK’s Rough gas storage facility.

Underground storage in the UK stood at 42.4% of capacity on Jan.11, down from 80.2% a year earlier, according to GIE. However, UK gas transmission operator National Gas said the overall picture of gas supply at the eight main gas storage sites looked healthy.

On Jan. 9, Dutch gas operator Gasunie Transport Services said gas storage was being depleted at a higher rate than expected and could not be explained solely by winter temperatures. The operator warned that in the event of a severe winter, higher whole sale gas prices might result but said security of supply was guaranteed.

European Commission sets intermediate targets

The European Commission has set intermediate targets for 18 European states ahead of the Nov.1, 2025 target of ensuring that underground storage is 90% full. These targets range from 30%-70% for Feb.1 and 5%-70% for May 1 and include targets for leading regional importers Belgium, Spain, the Netherlands, France, Germany and Italy.

The Commission is also likely to extend the regulations on mandatory storage levels when they are due to expire at the end of this year. The regulations were introduced in June 2022 following Russia’s invasion of Ukraine.

Markets are expecting increased gas demand for storage because of a heavy drawdown in winter 2024/2025. Storage injection demand has left TTF prices for this summer higher than winter 2025/2026 TTF prices.

The last two European winters have been mild, leading to modest stock draws and a gradual recovery in stocks in the summer reinjection season. The last major colder-than-normal winter in 2017/2018 saw underground stocks end the winter at 10% of capacity. In normal winters, storage accounts for 25-30% of EU gas consumption.

The various targets for this year are based on submissions from EU states in September last year, which are determined by the filling rates of the previous five years, and the Commission’s own assessment of the security of supply situation in the EU and its members.

Targets determined by previous filling rates, Commission’s supply security assessment

The 90% target last year was reached on Aug. 19, 2024. By Nov.1, storage was over 95% or around 100 Bcm after reaching a high of 96.1% full on Oct.15. This represents approximately a third of EU annual gas consumption. The US, Russia and Qatar are leading LNG suppliers to the EU.