With persistently mild temperatures, the gas storage facilities in Germany should soon be full to the brim. The gas price has already fallen by more than half since the beginning of the month. Is the crisis over? And what will become of the gas that we may still need but can no longer store?
The situation in the energy crisis could be much more dramatic. Thanks to mild temperatures and therefore economical heating, the gas storage tanks are more than 95 percent full. If the weather stays the way it is, these should soon be full to the brim. Germany benefits from the fact that it consumes less gas than supplies are stored. The price has also come down significantly. That's gratifying. But it doesn't mean the all clear.
However, the prices on the raw materials market are currently primarily reflecting this comfortable situation. The futures contract TTF for Dutch natural gas, which is regarded as trend-setting, temporarily cost only 100 euros per megawatt hour (MWh) the day before for November. With that, the TTF contract fell to its lowest level since June. On Tuesday morning, it continued to slide down to 94.59 euros per megawatt hour. At the end of August, the TTF contract still cost EUR 330 per MWh. Might we do much better without Russian gas than we thought? How low will prices tumble once the warehouses are filled to the brim?
First of all, the Federal Network Agency makes it clear: Full gas storage facilities are "good news. That will help in winter". Contrary to what some assume, the current fill levels are not unusual for this time of year. Even with falling temperatures, "it is not to be expected that gas withdrawal will begin in the coming weeks". From the authorities' point of view, however, there is no reason for excessive euphoria in view of full gas storage facilities. "The situation is tense and a deterioration in the situation cannot be ruled out," warns the Federal Network Agency in its most recent management report.
As the authority emphasizes to ntv.de, the German gas supply in winter can never come exclusively from the storage facilities because the quantities stored are simply not sufficient for this. "We always need an additional continuous import of gas. A significant proportion of these quantities currently come from LNG, which mainly comes to us via the terminals in the Netherlands and Belgium," says the network agency.
According to a rough calculation, if the entire gas consumption were to be fed from the current stocks, the stocks would only last for about 72 days - provided the consumption was similar to the previous years. If not enough gas is imported, these stocks must prevent us from getting through the winter without gas cuts. So the fuller the memory, the better.
The strenuous shopping spree for gas won't be the proverbial camel's last straw - at least not for the time being. On the one hand, there is no real oversupply because the stored gas is not reserved exclusively for German consumers and companies. If there is more gas than is needed, it can be sold. The sale then usually follows the highest price offer and the most liquid market. The principle of mutual solidarity applies in the European internal energy market.
On the other hand, there is also the option of buying less gas or no gas at all if Germany "has exceeded its target", as Tobias Federico from the consulting firm Energy Brainpool says on ntv.de. Shipowners could also ship cargo from LNG tankers that Europe either cannot unload or does not need to Japan or other countries in Asia. "The LNG business is much more dynamic than pipeline gas. Something that has not yet been properly understood in politics," says Federico.
Gas consumption is strongly linked to the weather. In the energy crisis, Europe is currently not benefiting from full gas storage facilities, but above all from the mild temperatures. But it can be assumed that it will soon be colder. Whether the gas will be scarce in winter and may have to be rationed is an open question. On the futures market, however, greater gas consumption is at least already priced in: the December contract is quoted at prices of over EUR 140 per MWh, and the prices for the following contract months are also higher.
According to the Danish economist Andreas Steno Larsen, what is currently dampening gas prices has less to do with the current levels than with the many incoming LNG tankers from overseas that are damming up in front of Spanish ports. If brokers see that a product is offered but cannot be fully purchased by the buyer at times, this means there is an oversupply and the gas price falls, according to the Finanzmarktwelt portal, citing the former chief strategist at the major Scandinavian bank Nordea and current senior editor at Real Vision . In his view, the natural gas curve will continue to fall until the heating season really gets going.
Despite full storage facilities, generous LNG loads and mild temperatures, the appeal to consumers and industry to save gas is no longer valid either this year or next. According to the experts, much more effort is needed to keep supply and demand in balance. The head of the Federal Network Agency, Klaus Müller, assumes that private households will have to save a fifth of their energy so that Germany can get through the winter well. If households do not achieve this goal, there will be cuts in industry.
The gas price will probably not fall to zero with a view to the filling levels, as Andreas Steno Larsen provocatively and rather rhetorically asks on Twitter - if only because of the winter of 2023/24, when Russian gas for filling the gas storage facilities is no longer available due to sanctions.
He himself does the math for liquefied gas: "LNG accounts for 40 percent of the current gas supply in Europe, but due to the lack of Russian gas, Europe is still 20 to 25 percent below the usual amounts. The winter ahead seems certain to be, but in 2023 there could be turbulence again," writes Andreas Steno Larsen. By then at the latest, the gas price should climb to new heights again.
It is important to keep reserves as large as possible. For this reason, the federal government has also increased the values for gas storage by ministerial decree. Fortunately, the goal of having a fill level of 95 percent on November 1st was already achieved on October 13th. On February 1, 2023, the storage should still be 40 percent full. Whether that will work remains to be seen.
However, full storage alone will not end the energy crisis. They are simply too small to get industry and consumers through an entire winter. Even full LNG tankers will not ensure that natural gas will soon be given away or money will have to be paid to get rid of the gas at short notice - just because the weather is mild and the storage tanks are full. In such cases, a normal market needs "overcapacity in storage" to prevent negative prices, says Federico from Brainpool Energy. "But the next two winters are not normal."
