A Swiss trader expects a material increase in European LNG supplies in the coming weeks.
According to Axpo’s market outlook, the gas market was tight with European storage well down on 2024’s level and the five year average.
Gas Infrastructure Europe data showed that storage levels were at 49% of capacity on 8th February.
The tighter set-up makes end winter storage level in the 30% range more likely, Axpo said, which will leave a big gap to fill to reach the mandated 90% needed by 1st November.
One way to address this challenge was by attracting additional LNG cargoes to Europe. Prices were already signaling this move and Axpo expected a material increase in LNG cargo arrivals in Europe during the coming weeks.
However, whether this will be sufficient to fill the storage gap remains to be seen, the report said.
Little wind and cooler weather this winter thus far, compared to 2022/23, plus the end of Russian gas deliveries via Ukraine, helped to drive the largest January EU storage withdrawal seen since 2021.
European gas prices surged to two years highs last week on the back of the storage concerns and cold weather.
Under the EU’s gas storage regulation adopted in June, 2022, mandatory storage targets are set for member countries, including the interim filling levels that should be reached.
This year’s 1st November target of 90% full will be the final one before the regulation expires at the end of 2025, unless the rules are extended or new arrangements are put in place.
Equinor’s CEO, Anders Opedal has said that Europe would need more LNG to refill its stocks.
“If you want to go back to 90% storage levels, Europe needs to attract 230 more LNG cargoes than last year, which represents around a 20% increase, “ he said, adding…” I think that demonstrates the competition for LNG that we will see between Europe and Asia over the summer.”
Storage filling
The market also remains concerned about storage filling this summer given an inverted summer-winter spread.
German gas market manager, Trading Hub Europe (THE) unveiled plans last month for a new gas storage product designed to encourage market participants to inject gas into storage sites, despite insufficient seasonal spreads.
The product concept’s focus is to subsidise new injections and to provide incentives for storing gas, a THE spokesperson told S&P Global.
Axpo said that Germany and other countries were now working out how subsidy mechanisms may look to fill their out of the money (OTM) storage.
Overall, Europe’s large storage requirements this summer and the uncertainty surrounding regulatory intervention were setting up a strong, if volatile, gas market over the coming months, the trader said.
