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Europe is using more gas from storage this year

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Gas caverns need to refill to 90% by Nov. 1

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Supply is sufficient but EU refill will raise global

competition

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EU needs to buy an extra 12 billion cubic metres of gas

By Nora Buli and Kate Abnett

OSLO/BRUSSELS, Jan 22 (Reuters) - Europe may have to buy

at least 100 additional gas cargoes this summer, worth around $6

billion at today's prices, to replenish gas stocks after a

plunge in storage levels this winter due to cold weather and a

stoppage of Russian supply.

EU gas storage sites have emptied faster this year than in

recent winters and are currently 59% full, according to the

latest data from Gas Infrastructure Europe.

That is much lower than this time last year, when storage

was still 75% full, or the 79% filling level at the same time in

2023, after the 2022 energy crisis triggered by Russia's

invasion of Ukraine.

By the end of March, storage levels could drop to as low as

30-35% of capacity, said Rabobank energy strategist Florence

Schmit. EU gas storage was 58% full at end-March last year.

If storage drops to 35% full - around 38 billion cubic

meters (bcm) - European buyers will need to find an extra 12 bcm

of gas on the global market this summer, compared with 2024,

Energy Aspects analyst Erisa Pasko said.

That 12 bcm equates to around 120 liquefied natural gas

(LNG) tankers worth $6 billion at today's prices, according to

Reuters calculations.

"Europe will need to maintain high prices to continue

attracting spot and divertible LNG supply away from Asia," Pasko

said.

The storage concerns are helping to prop up already high

European gas prices, which are trading at 14-month highs, also

boosted by cold weather and the end of Russian gas transit via

Ukraine.

Europe's higher demand for refilling storage is also

reflected in high gas prices for the summer months, which are

more expensive than contracts covering next winter.

This is unusual and last occurred in late 2021 and 2022,

when Russia's Gazprom stopped filling its European storages,

according to LSEG data.

Energy Aspects expects summer EU gas prices of 49.50 euros

per megawatt hour (MWh), accounting for the loss of some Russian

LNG due to U.S. sanctions.

Front-month TTF gas prices were trading at around 49

euros/MWh on Wednesday, up from 27.70 euros/MWh a year ago - but

still far below their peak above 300 euros/MWh during the 2022

energy crisis.

Rabobank only sees summer prices at 34-37 euros/MWh, a 10%

rise over 2024 levels but below where the market is currently

trading.

Rabobank's Schmit said this was because relatively high

prices would continue to dampen European consumers' gas demand,

offsetting some of need for LNG to replace lost Russian pipeline

supplies and to refill storage.

Europe's gas-intensive industrial production has been

trending down since 2022, as firms struggle with weak consumer

demand, cheap Chinese competition and high energy costs.

GLOBAL IMPACT

Analysts and industry agree that European gas shortages are

unlikely this year. Even Slovakia, the country hit hardest by

the end of Ukraine gas transit, has said it has enough supply

and storage to cover 2025.

"We're really not concerned about the fact that storage will

be depleted and we cannot find supplies. But of course, this is

not to say it's going to be cheap to refill them," said Aurora

Energy Research analyst Arturo Regalado.

Germany's gas market trading hub is in talks with the

economy ministry and regulator about the possibility of

contractors receiving subsidies to refill gas storage sites.

The EU's need to buy more gas will reverberate around the

world, potentially pulling LNG cargoes away from Asia.

"Globally, there is possibly still a shortage in terms of

gas supplies," said Andreas Guth, head of industry association

Eurogas, though he noted that shortages are not expected in

Europe.

While two new U.S. LNG export terminals are expected to

start up this year, the market will remain tight until 2027.