Commerzbank’s Thu Lan Nguyen warns that unusually low gas storage levels in Germany and across the EU, combined with higher consumption and a flatter forward curve, raise the risk of price spikes and potential consumption restrictions. Expanded LNG import capacity and flexible spot-market sourcing reduce the need for storage, but cannot fully cover peak winter demand, leaving the region vulnerable to supply shocks and weather extremes.

Low storage and LNG reshape gas risk

"At the current rate of depletion, EU-wide gas reserves would fall to less than 20% by the end of winter. In Germany, this level is likely to be breached as early as the last week of February. The historic low of around 14% in 2018 is then likely to be within striking distance."

"Experts at the Cologne Institute for Energy Economics (EWI) even warn that storage levels could fall below the 10% mark necessary to ensure system security if a cold spell would unexpectedly last until the end of March. To prevent this from happening, the EU would have to significantly increase the utilization rate of its import capacities to 90% from the current level of around 55% (Figure 3). However, withdrawals usually slow down in March as temperatures become milder."

"This year, LNG import capacity is set to increase by a further 2% (Figure 4). Imports can thus cover an ever-increasing share of domestic gas consumption, reducing the need for high storage levels. LNG has the advantage that, unlike pipeline gas, it can be purchased more flexibly on the global market."

"Currently, the forward curve also shows stable prices for the coming year, rather than the usual upward trend seen in the past. This is likely due to the prospect of a further significant expansion in supply. The IEAexpects LNG supply to increase by a substantial 7% this year, as it did last year. For this reason, we also expect gas prices to trend downward toward the end of the year."

"If gas storage levels were at critical levels in such cases, European suppliers would be forced to purchase gas at significantly higher prices on the spot market and/or restrictions on consumption would be necessary. These would then primarily affect industry in order to protect private households."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)