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Column: Europe’s gas stocks finish winter at comfortable level

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Storage sites across the European Union and the United Kingdom (EU28) held an estimated 294 Terawatt-hours (TWh) of gas on April 1, according to preliminary estimates from Gas Infrastructure Europe.

Gas inventories were 61 TWh (17%) or around 0.54 standard deviations below the previous 10-year average for the time of year.

But the situation has improved significantly since Christmas, when stocks were expected to fall to just 215 TWh by April 1, which would have been 142 TWh (40%) or 1.22 standard deviations below average.

Temperatures have been warmer than normal, especially since the turn of the year, which has curbed gas consumption and eased pressure on stocks.

The cumulative number of heating degree days at Frankfurt in Germany has been more than 11% below the long-term average.

Equally important, record futures prices in Europe have encouraged LNG suppliers to export there rather than to Asia, while high prices have also discouraged consumption by power generators and industrial users.

As a result, the post-winter low in stocks occurred on March 19, 11-12 days earlier than the median over the last decade, and they are now rising slightly.

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Total depletion of inventories from last year’s post-summer high to this year’s post-winter low was 578 TWh, only slightly higher than average over the last decade (561 TWh) and below average for the last five years (651 TWh).

Market attention has now turned to refilling storage and accumulating inventories ahead of next winter but the rebuilding starts from a reasonably comfortable baseline.

If inventories accumulate in line with the average for the last 10 years, they are expected to reach 871 TWh by the start of October.

Inventories would then be around the same level as last year although still 61 TWh (7%) below the average for the last decade.

In practice, very high gas prices will continue to encourage maximum imports and discourage consumption, which is likely to refill storage faster than usual.

Provided pipeline imports from Russia are not interrupted or sanctioned, and that is a critical assumption, high prices should ensure inventories are above average before next winter.

John Kemp is a Reuters market analyst. The views expressed are his own

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