2 days Ago By Tsvetana Paraskova
As the first proper winter in Europe in three years is drawing to an end, the continent faces a race against time – and prices – to restock with natural gas for next winter. With gas in storage levels well below the stockpiles left at the end of the previous two winters, Europe will need extra efforts – and money – to refill inventories ahead of the 2025/2026 winter. if(window.
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push({ placementName: "oilprice_medrec_atf", slotId: "oilprice_medrec_atf" });';document.write(write_html);} Europe will now need many more cargoes to arrive during the summer compared to 2023 and 2024, as current gas inventory levels are just 37% full, per data from Gas Infrastructure Europe. This compares with storage full at over 60% in March 2024 and March 2023.
Europe was lucky enough to go through two mild winters right after the Russian invasion of Ukraine and the halt to most Russian pipeline gas supply to Europe. This winter, it wasn’t so lucky in terms of winter temperatures. Also, due to the end of the Russian gas transit via Ukraine from January 1, 2025, and low wind power output, Europe depleted its gas stockpiles at the fastest pace in seven years.
As the winter heating season ends, Europe now needs to start stockpiling gas for the summer. Summer Refill The summer refill season, however, presents several challenges in availability, prices, and the money that Europe will have to spend on additional LNG. Europe could need as many as 250 additional LNG cargoes to arrive in the summer to refill its inventories back up to 90% by November 1, as the current EU regulation stipulates, per Reuters calculations reported by columnist Ron Bousso.
That’s assuming the EU doesn’t ease the 90% refill target and gas storage levels end up at 35% full as of March 31. The LNG market appears to be tightening, with supply not rising fast enough in early 2025 to meet demand. The IEA warned last month of a tighter LNG market in 2025 as low EU gas inventory levels at the end of this winter “will require much bigger inflows of gas than in the previous two years, increasing Europe’s call on global LNG markets and tightening market fundamentals.
” Global LNG supply growth is expected to accelerate from just 1.5% last year to 5% in 2025, driven by the ramping up of North American LNG facilities. But this supply growth is being partially offset by the halt of Russian gas transit via Ukraine, the IEA said.
Overall, European demand for natural gas has declined since 2022 due to the rise in renewable energy capacity and weak industrial gas demand amid volatile gas markets with price spikes. if(window.innerWidth ADVERTISEMENTfreestar.
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write(write_html);} “While LNG continued to play a vital role in European energy security in 2024, imports fell by 23 million tonnes, or 19%, due to strong renewable energy generation and a limited recovery in industrial gas demand,” Shell, the world’s top LNG trader, said in its annual LNG Outlook 2025 last month. However, the cold winter temperatures and spells of low wind power generation drove strong gas storage withdrawals which, combined with the expiry of Russian pipeline gas flows through Ukraine, drove up prices, Shell added. Europe is expected to increase imports of LNG in 2025 to refill its gas storage, Shell noted.
Price Hikes in Tightening LNG Market Europe needs to significantly increase refilling efforts and rates this summer to have adequate supply in storage ahead of next winter. The good news for Europe is that it has been beating on price Asia, where sufficient inventories and tepid demand have prevented price spikes in spot LNG prices for delivery into northeast Asia. LNG exporters have for months been incentivized to send LNG cargoes to Europe, where the price equivalent of the imported gas has been higher than in Asia, allowing the U.
S.-Europe arbitrage trade. More than 80% of U.
S. LNG exports went to Europe in January and February this year, as European prices have remained stronger than in Asia and even hit a two-year high in February amid the first proper winter with prolonged periods of cold snaps since the 2022 energy crisis. Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, have dropped in recent weeks, but the US-Europe arbitrage is still pointing to Europe, Spark Commodities said earlier this week.
The bad news for Europe is that due to the need to replenish inventories from much lower levels than in previous years, the summer 2025 forward TTF prices have been trading at a premium to the winter 2026 prices, which typically discourages stocking up on a commodity. In the usual market conditions, prices for the winter months would be higher than those in the summer. But the gas markets in Europe and elsewhere have been anything but ‘normal’ in recent years.
Amid the summer price premiums that make stockpiling uneconomical, utilities and market operators in key European economies, including Germany, have called for government support to help replenish inventories ahead of the 2025/2026 winter. Reports have also emerged that the EU could be discussing an easing of the EU-wide targets for refilling gas levels. Stronger than usual demand in Europe to refill inventories is expected to support LNG and Europe’s natural gas prices throughout the summer and extend the current tightness in the market.
“Global gas markets are unlikely to start to ease significantly until well into 2026 when a huge wave of new LNG supply is set to start hitting international markets,” the IEA said last month. By Tsvetana Paraskova for Oilprice.com More Top Reads From Oilprice.
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