European gas storage sites deplete at fastest pace since 2018

The weather has turned colder across most of northwest Europe, which could spur further withdrawals in the coming days as gas usage for heating increases.

Europe is burning through gas reserves more quickly than at any point in the past seven years, as cold weather ramps up heating needs, with temperatures expected to remain low this week.

The region’s vast underground storage sites — which act as a buffer against tighter flows — are just over 70% full, compared with about 86% a year ago. While there is no risk of an immediate shortfall, the rapid depletion may make stockpiling more challenging ahead of the next heating season, and risks impacting short-term prices.

Storage levels have dropped a total of 25 percentage points from their peak — more than any drop since 2018, according to Gas Infrastructure Europe data compiled by Bloomberg.

“The lower that end-March storage levels are, the harder it will be for the region to refill ahead of next winter,” said Samantha Dart, Goldman Sachs Group Inc’s head of natural gas research. 

“Specifically, under the colder-than-average scenario that is currently forecast.”

The weather has turned colder across most of northwest Europe, which could spur further withdrawals in the coming days as gas usage for heating increases.

Price swings

The continent is also increasingly exposed to market volatility as it relies on global liquefied natural gas to replace the shortfall left by the end of Russian pipeline flows via Ukraine.

Unplanned outages at top suppliers can impact the region’s fragile balance and spark price swings.

In Norway, the Hammerfest plant has halted operations until January 9 due to a compressor failure.

Dutch front-month gas, Europe’s benchmark, fell 3.1% to €48.11MWh in Amsterdam on Monday.

Yet it is still elevated after surging 4% last week, as the market grapples with declining stockpiles and tighter supplies.

It could be a technical reversal after the recent price rally, said Florence Schmit, a European energy strategist at Rabobank.

The sentiment is still bullish but the market is adjusting to the “new normal”, she said.

• Bloomberg