Europe will have to compete with Asia for LNG to meet its 2025 gas storage targets given lower gas stock levels currently and the expiry of the Russia-Ukraine gas transit deal, Switzerland-based energy trader Axpo said.
In a market outlook, Axpo said a cold end to 2024 and slower LNG imports had seen Europe’s gas storage stocks fall below the five-year average, while the transit deal expiry meant lower Russian pipeline supplies to Europe.
“This reduction, along with unplanned outages at major suppliers, forces Europe to intensify its competition with Asia in the global LNG market to secure large volumes of LNG imports and meet its official storage target of 90% by November 2025,” it said.
According to data from Gas Infrastructure Europe, the EU’s gas storage sites are currently filled to just 65% of capacity, compared with a level of almost 80% this time last year.
Under the EU’s gas storage regulation adopted in June 2022, mandatory storage targets are set for member states including interim filling levels that should be reached.
The Nov. 1 target of 90% fullness will be the last before the regulation expires at the end of 2025.
Market concerns over fast-depleting gas stocks and the confirmation of an end to Russian gas transit via Ukraine have lent weight to European gas prices, which hit 14-month highs in early January.
Prices have dropped back since the start of the month, however, with Platts, part of S&P Global Commodity Insights, assessing the TTF month-ahead price at Eur47.10/MWh on Jan. 14, down from an assessed peak of Eur49.95/MWh on Jan. 2.
Geopolitical risk
Axpo also said there was continued geopolitical risk that could impact energy markets.
“Markets are bracing for the implications of the second Trump administration in the US,” it said, which could include potential political intervention in the Russia-Ukraine conflict.
Axpo said political uncertainty was also mounting in Europe with German elections scheduled for February that potentially have implications for the construction of 10.5 GW of new hydrogen-ready gas-fired power plant and the 2030 goal for coal phase-out.
“These developments are particularly significant for the broader European energy market, given Germany’s pivotal role in the EU’s economy and its influence on the financial electricity market,” Axpo said.
It said that considering all these developments, it expected an eventful 2024 to be followed by another eventful year.
This year, it said, would be marked by “unpredictable geopolitical events, political shifts and guidance, macroeconomic uncertainty, and variable weather conditions, all of which will contribute to maintaining high levels of energy price volatility throughout 2025.”
Source: Platts