Europe will enter the winter heating season with a record amount of gas in storage, protecting the region from the threat of shortag-es and a repeat of last year’s high prices.

Gas inventories across the European Union and the United Kingdom amounted to 1,096 terawatt-hours (TWh) on Sept. 30, accord-ing to data from Gas Infrastructure Europe (GIE).

Inventories were +172 TWh (+19% or +1.59 standard deviations) above the prior ten-year seasonal average on the date marking the end of the main summer refill season.

Storage facilities were 96% full, the second-highest on record after 2019, and compared with a ten-year seasonal average of 87%.

The high level of starting stocks, coupled with new LNG import terminals, and some extra gas stored in Ukraine, should ensure in-ventories remain comfortable no matter what the weather during winter 2023/24.

In the last decade, the largest ever winter drawdown was -782 TWh with an average of just -588 TWh, so the region should be able to get through winter without fear of shortages.

Reflecting comfortable storage, futures prices for gas delivered in January 2024 have averaged 44 euros ($46.62) per megawatt-hour so far in October down from 54 euros in March and 151 euros a year ago.

The front-month futures contract is trading around 38 euros per megawatt-hour, in the 86th percentile for all months since 2010, after adjusting for inflation.

Gas prices remain elevated compared with the years before Russia’s invasion of Ukraine in February 2022. In real terms, prices are about 55% higher than the average for 2010-2020.

But the sense of crisis which gripped the market in the summer of 2022 and first half of winter 2022/23 has ended and is unlikely to return.

SMALL REFILL

Plentiful inventories at the start of winter 2023/24 are mostly the result of a record carryout at the end of winter 2022/23, thanks to a mixture of luck and the impact of high prices restraining gas demand.

Warmer-than-normal temperatures combined with sharp reductions in industrial consumption and high prices to curb gas use by power generators and others left the region with extraordinarily high inventories.

Inventories amounted to a record 634 TWh at the end of March 2023, which was an enormous +284 TWh (+81% or +2.43 standard deviations) above the ten-year average.

The large amount of gas inherited from winter 2022/23 has ensured the region only needed a modest refill over the summer of 2023.

Inventories increased by just +461 TWh between March 31 and September 30, the smallest refill since 2020 and before that 2014.

Stocks grew at an average rate of 2.52 TWh per day compared with an average rate of 3.12 TWh over the past ten years.

Europe’s modest refill requirement and slower importing has lowered prices globally and allowed more price-sensitive customers in Asia to top up their own stocks.

Having taken a lot of pain upfront in the form of eye-wateringly high prices during winter of 2022/23, Europe’s gas storage is much better positioned for the winter of 2023/24.
Source: Reuters (John Kemp is a Reuters market analyst. The views expressed are his own)