Germany scrambles to refill gas stores as cold snap looms
Germany is scrambling to refill its gas storage tanks as Europe braces for a cold snap.
The company in charge of managing the German gas market, Trading Hub Europe, said it was in 'intensive' talks about paying subsidies to utility firms to refill the country's storage facilities after supplies dropped below 50pc.
It comes as the Continent prepares for freezing temperatures next week. German gas reserves are languishing at just two thirds of the level they were at a year ago.
A blast of chilly Arctic air is expected to trigger extra demand for heating and electricity in Northern Europe.
Across the European Union, official data showed that gas storage levels were at an estimated 48.5pc on Tuesday – the lowest level for this time of year since 2022, when Russia's invasion of Ukraine triggered a supply crunch.
Germany, which has the biggest reserves of any country, was down to 49pc, compared to 72pc at the same point in 2024.
Among the lowest on Tuesday were Belgium, where reserves stood at 36pc, the Netherlands at 33pc and Croatia and France both at about 30pc.
While many analysts believe that these storage levels will be enough for Europe to weather the rest of the heating season, companies are under pressure to refill the tanks ahead of next winter.
Under EU laws passed in 2022, utilities must fill up storage facilities to at least 90pc capacity by the beginning of November each year. There are also intermediary targets that companies must hit for February, May, July and September.
Traders typically stockpile gas during the warmer months in preparation for the winter as prices tend to be lower.
This year, utilities have more ground to make up as they replenish their gas stockpiles. This is because the colder temperatures this winter than in 2022 and 2023 have left storage levels lower than before.
So-called 'dunkelflaute' periods of calm weather have also sent output from wind and solar farms plunging.
At the same time, there are fears that Europe may have to compete with Asia for supplies of liquefied natural gas (LNG) as countries in the east stock up in anticipation of a hot summer and high demand for air conditioning.
That has helped to push up the European benchmark gas price. This week, it reached a two year high.
In the past year, the price has steadily increased from around €25 (£21) per megawatt hour to about €57 per megawatt hour on Tuesday.
These high prices have made utilities reluctant to refill their facilities so far, prompting countries such as Germany to consider providing extra incentives – an idea some have blamed for stoking prices further.
On Tuesday, BNP Paribas argued the surges in the gas price 'look unjustified'.
Aldo Spanjer, a Bank analyst, said in a note to clients: 'Looking at actual gas stocks, and comparing them against an average that excludes the outlier winters of the last two years, leads us to conclude we are in an average winter, pure and simple.'
Assuming a more normal summer in 2025, he predicted Asian demand for air conditioning would be lower than last year and this would free up LNG cargoes to go to Europe.
'We forecast Europe to not only get more LNG but also get it cheaper than is currently assumed,' Mr Spanjer added.
He predicted the market 'would eventually settle down' but that prices would remain high for at least as long as traders were spooked by the prospect of further cold weather.
Next week, temperatures in the UK and the rest of Northern Europe are forecast to plunge below zero, with freezing winds set to hit.
In Norway, where some of the lowest temperatures are expected, the mercury in Oslo is expected to drop to -9C, which is around 6C colder than the seasonal average.
In Berlin, meanwhile, temperatures could drop to -7C on Monday, nearly 5C lower than normal.
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