October 24, 2022 [Reuters] – Europe’s gas futures prices have started to soften as storage facilities become full, signalling the need to slow the pace of inventory growth, even though rationing could still be needed later this winter.
Futures for deliveries in January 2023, likely to be the coldest part of winter 2022/23, have fallen by almost 30 euros per megawatt-hour (MWh) since Sept. 13.
But prices for deliveries in November 2022, the start of the main heating season, have fallen much faster, by 49 euros per MWh over the same time period.
As a result, the calendar spread from November to January has slumped into a large contango of 18 euros per MWh from a backwardation of 4 euros as recently as the middle of July.
Traders now anticipate supplies will be plentiful during the first part of winter though concerns about availability later in the season persist.
Inventories in the European Union and the United Kingdom (EU28) have climbed to 1,029 terawatt-hours (TWh), according to data from Gas Infrastructure Europe.
Stocks are +110 TWh (+12% or +1.0 standard deviations) above the seasonal average for the previous ten years (“Aggregated gas storage inventory”, GIE, Oct. 13).
And they are still rising by almost +3 TWh per day, a record for this time of year, as traders and utilities maximise stocks in response to government instructions.
Stocks are on course to continue accumulating later into October or even early November than usual, boosting the total, delaying the onset of depletion, and increasing winter energy security.
But storage sites are nearing their full capacity. For the European Union as a whole, storage is already at 92% of its maximum capacity.
Storage is close to the maximum in France (98%), Germany (95%), the Netherlands (93%) and Italy (93%), which collectively account for two-thirds of all EU inventories.
There is still some spare capacity in Hungary (77%), Austria (85%) and the Czech Republic (89%) and other small storers.
However, with space running short, nearby futures prices are retreating in a signal to slow the rate of inventory additions and encourage more consumption.
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