(Bloomberg) -- Europe is dipping into its gas storage faster than expected, and with the fuel turning pricier for summer, top consumer Germany has warned of refilling risks for the next heating season.
The spread between contracts for the next summer and winter 2025-26 is widening, making it unprofitable to buy fuel to shore up inventories. The premium jumped to the highest since the peak of the energy crisis two years ago earlier this month.
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Stockpile withdrawals across the European Union accelerated this week, hitting levels last seen in January — normally a month when the region’s heating demand peaks — data from Gas Infrastructure Europe show. Chillier weather, coupled with a slump in wind generation, boosted gas needs across the continent.
Traders are already looking to next winter and the European Union’s mandatory target of keeping its storages at least 90% full by next November. If higher costs make market players — from utilities to trading houses — delay refills next summer, governments may need to step in, adding uncertainty to an already volatile market.
Germany’s gas storage group INES warned earlier this week that the cost efficiency of mandatory refill levels “should be reviewed and ensured.”
“The current negative summer-winter spread is causing concerns that the price signals are not providing sufficient incentives for the market to refill,” Sebastian Heinermann, INES managing director, said in a statement.
In Germany, which requires reserves to be at 95% every November, the market manager Trading Hub Europe GmbH is obliged to ensure the target is reached if traders fail to do so in time. It can pass the expenses on to the grid users, already facing high energy costs. During the peak of the crisis, the government had set aside credit lines of more than €15 billion to cover the operator’s losses.
On Friday, the manager said it was monitoring the market but “does not currently assume that storage facilities will have to be filled by THE in 2025.”
Traders can still add to storage later this winter — on days when demand is low — but much depends on the weather. Freezing conditions could create the risk of German stockpiles being depleted by mid-February, according to INES. EU’s average storage levels could drop to about 20% in that case, according to BloombergNEF estimates. Currently it’s 92% for Europe — below last year’s levels — and about 96% for Germany.
Still, the market should ease if there are no extremes this heating season, according to BNP Paribas. “While a harsh winter would create genuine concern, all our other scenarios point to relatively comfortable levels that don’t justify the current summer premium,” Aldo Spanjer, senior commodities strategist, wrote in a recent note.
--With assistance from Priscila Azevedo Rocha.
(Updates with comments from Germany’s THE)
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