LONDON, Nov 28 (Reuters) – Gas stocks in Europe are set to end the winter of 2022/23 at one of the highest levels on record – if prices stay high and pipeline deliveries from Russia continue .
European Union and United Kingdom (EU28) storage stood at 1,061 terawatt hours (TWh) on November 26, a record for the time of year, according to storage data from Gas Infrastructure Europe (GIE). ).
Inventories surpassed the previous seasonal high of 1,059 TWh set in 2019, when first-month futures prices were 16 euros per megawatt-hour compared to 119 euros currently (“Aggregated inventory of gas storage”, GIE, November 28).
Exceptionally high prices, energy savings and above normal temperatures since mid-October have combined to reduce consumption and attract large volumes of imported LNG.
Northwest Europe’s heating demand, represented by the number of heating degree days in Frankfurt, has been 22% lower so far this winter than the long-term average.
As a result, EU28 gas stocks are 186 TWh (+21% or +1.79 standard deviation) above the 10-year seasonal average, compared to a surplus of 91 TWh (+10% or +0, 86 standard deviation) in early October.
REALIZATION AFTER WINTER
Over the past 10 years, across a range of weather and price scenarios, inventories have been depleted by an average of -531 TWh between November 26 and the post-winter low.
Depletions varied from -712 TWh in winter 2018/19 to -311 TWh in winter 2014/15.
If the storage trajectory conforms to this pattern this winter, inventories are on track for a post-winter low of 530 TWh, with a likely range of 349 TWh to 750 TWh.
The central projection of 530 TWh would leave end-of-winter stocks at the second-highest level ever, surpassed only in the winter of 2019/20.
Even the minimum projection of 349 TWh would leave post-winter inventories higher than in six of the past 10 years.
Chartbook: Gas stocks in Europe
These projections may be too high because they assume that the Russian gas pipeline is not interrupted by an embargo or sanctions, which would lead to a much greater depletion.
On the other hand, extraordinarily high prices are likely to dampen consumption far more than in any of the past 10 years, leading to lower than usual depletion.
Overall, the post-winter inventory situation now looks much more comfortable than at the end of the third quarter, with a much lower risk of inventory running out to extremely low levels.
The calendar gap between benchmark gas futures contracts with deliveries in March 2023 and April 2023 is a measure of the likelihood that inventories will fall to a critical level before the end of winter.
The March-April gap is now down by less than 1 euro per megawatt hour, against 10 euros at the end of September, 26 euros at the end of June and 42 euros at the end of March, shortly after the Russian invasion. Ukraine.
The early start, late end and record recharging of storage in 2022 has put stocks on track to end winter 2022/23 much more comfortably – which will also make recharging easier in 2023, provided the Russian gas continues to flow.
Associated columns:
– Gas storage in Europe peaks after record refill season (Reuters, November 18)
– Gas prices in Europe fall as storage nears full (Reuters, October 13)
– Mission accomplished? Europe fills gas storage ahead of schedule (Reuters, October 4)
– Europe rebuilds gas stocks, but winter demand cuts key (Reuters, September 7)
John Kemp is a market analyst at Reuters. Opinions expressed are his own.
Editing by David Evans
Our standards: The Thomson Reuters Trust Principles.
The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias by principles of trust.
