Europe's Gas Storage Empties At Fastest Rate Since 2016

Europe's gas inventories have decreased at the fastest rate in eight years due to repeated cold temperatures and low wind speeds since the start of the winter heating season. Between October 1 and November 26, combined inventories in underground storage across the European Union and the United Kingdom dropped by 83 terawatt-hours (TWh). This is more than four times the average rate over the last ten years and the most since 2016. Despite being 58 TWh above the prior ten-year seasonal average, the surplus has narrowed significantly from 122 TWh at the start of winter. Storage facilities are now 87% full, down from 97% in 2023 and 94% in 2022. Colder temperatures have boosted heating demand, while below-normal wind speeds have cut generation from offshore wind farms, forcing more reliance on gas-fired units. Based on inventory movements over the last decade, EU and UK stocks are on course to end the winter around 468 TWh, which is already much lower than the record carryouts at the end of winter 2023/24 and 2022/23. This means inventories will end the winter almost 30% below the previous records. Although stocks are still comfortable, prices have risen to discourage consumption and attract more liquefied natural gas (LNG) cargoes to the region. Front-month futures prices on the Dutch Title Transfer Facility averaged €44 per megawatt-hour in November, up from €36 in September and €26 in February. Adjusted for inflation, November prices are in the 87th percentile for all months since 2010, indicating the need to conserve stocks and attract more supply. The greatest futures price increases have been for deliveries after this winter ends, in the second and third quarters of 2025. Traders anticipate Europe will need to buy much more gas to refill its storage facilities in the summer of 2025 than in the summers of 2024 and 2023. Futures prices for the summer of 2025 have recently traded as much as €4 per megawatt-hour above those for the winter of 2025/26, signaling higher prices to attract more LNG cargoes away from Asia's growing gas markets. Europe's major challenge is what would happen if winter 2024/25 remains colder-than-normal and is followed by another cold winter in 2025/26. To minimize that risk, depleted inventories will have to be rebuilt during the summer of 2025, and traders are already betting that will prove expensive as Europe competes for more gas with fast-growing economies in Asia.