Europe Racing To Refill Gas Storage For Next Year Despite Mild Winter
As Europe emerges from a mild winter with gas storage close to record levels, it must brace for another costly race to replenish its reserves on the international market.
European gas prices rallied in the run-up to Moscow’s invasion of Ukraine began almost exactly a year ago and they leaped to record highs when Russia subsequently cut supplies of relatively cheap pipeline gas. [emphasis, links added]
Although European prices have eased to around 50 euros ($53) per megawatt-hour (MWh) from last August’s peak of more than 340 euros, they remain above historical averages.
That means European governments face another huge bill to refill storage before peak winter demand.
To ward off market volatility and protect against shortage, they will have to repeat the exercise annually until the continent has developed a more permanent alternative to the Russian pipeline gas on which it depended for decades.
Analysts and executives say the amounts already in storage will help, as will an increase in French nuclear generation following unusually extensive maintenance.
“The situation on the gas market is currently no longer so tense,” Markus Krebber, CEO of RWE, Germany’s biggest utility, told Reuters.
He did not expect any repeat of last year’s record price spike, but also said “one must not lull oneself into a false sense of security.”
Similarly, analysts cautioned against leaving it too late to buy for future delivery.
“We do not expect filling storage to be as costly next summer as it was this past year,” Jacob Mandel, senior analyst at Aurora Energy Research, said.
“That said, firms that rely on spot supply to fill storage, rather than hedge against future price jumps, will risk paying similar costs to last summer.”
He estimated buying gas over the summer months would cost “2-2.5 times more on a per unit basis than it had been pre-crisis” and that European governments last year spent tens of billions of euros on supplies.
That was even when they had received significant levels of Russian gas on long-term contracts before the shutdown of the Nord Stream pipeline to Germany in August.
Read rest at Reuters
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