LONDON, April 13 (Reuters) – Europe has ended the winter
of 2022/23 with a record volume of gas in storage – which leaves
much less refill needed ahead of the next heating season in
2023/24.
Inventories in the European Union and the United Kingdom
amounted to 632 terawatt-hours (TWh) on March 31, according to
Gas Infrastructure Europe (“Aggregated gas storage inventories”,
GIE, April 13).
Stocks were at a record high for the time of year and an
extraordinary 350 TWh (+80% or +2.40 standard deviations) above
the seasonal average for the previous ten years.
The situation has been transformed from the same date last
year when inventories were just 300 TWh and 53 TWh (-15% or
-0.46 standard deviations) below the seasonal average.
As a result, prices have slumped, with front-month futures
down to 48 euros per megawatt-hour on March 31 from 189 euros at
the start of the heating season on Oct. 1 and a record 339 euros
on Aug. 26.
Chartbook: Europe gas inventories and prices
RECORD REFILL IN 2022
Record end-of-winter inventories are a consequence of a
record start-of-winter stock; a mild winter, especially in the
first half; and significant cuts in industrial gas use.
The European Union and United Kingdom added an unprecedented
788 TWh of gas to storage in 2022 to prepare for a possible
interruption of pipeline supplies from Russia.
The refill started on the second-earliest date on record
(March 19) and continued until the latest date ever recorded
(Nov. 13), lasting for 239 days compared with an average of just
203 days over the previous ten years.
Refill was also faster and more consistent than usual, with
3.30 TWh added per day compared with an average of 2.96 TWh in
2012-2021.
As a consequence, inventories started the traditional winter
season at 996 TWh on Oct. 1 and continued building to reach
1,079 TWh on Nov. 13, a much higher and later peak than normal.
The scramble to fill storage regardless of cost,
particularly in Germany, was responsible for causing futures
prices to spike to a record high in July and August.
MILD START TO WINTER
High prices coupled with government mandates to reduce
consumption and warmer-than-normal temperatures through the
first half of winter extended the refill season and delayed the
onset of drawdown, a double benefit that stretched inventories
even further.
The first part of the heating season was exceptionally mild
in Northwest Europe, with only 860 heating degree days at
Frankfurt in Germany by Jan. 15, which was 16% fewer than the
average since 2000.
The second part of the heating season was also mild, but
less exceptional, with 761 heating degree days from Jan. 16 to
March 31, just 8% below the long-term average.
For Europe as a whole, both October and January were the
warmest on record; warmth in January was especially significant
because it is normally the month with the highest heating
demand.
The emergence of warm weather in January, first forecast a
month earlier, accelerated the slump in gas prices to 57 euros
on Jan. 31 from 149 euros on Dec. 7.
REDUCED CONSUMPTION
Europe’s gas consumption was sharply reduced in winter
2022/23 compared with previous years.
The European Union’s top seven consumers (Germany, Italy,
France, Netherlands, Spain, Belgium and Poland) used 18% less
gas than the average for the previous ten years between October
and January.
High prices and government mandates to reduce consumption
had their biggest impact on the most energy-intensive users.
Makers of fertilisers, steel, cement, ceramics, glass and
chemicals all reported capacity closures or longer than usual
shutdowns over the Christmas and New Year holiday period.
Households and other commercial users made less obvious
reductions in consumption, mostly in line with warmer
temperatures rather than signalling profound behaviour changes.
PLENTIFUL GAS STOCKS
Europe’s gas inventories depleted by only 450 TWh between
their peak in early November and their minimum in early April,
compared with an average peak to trough drawdown of 588 TWh in
the previous ten years.
Europe emptied around a third of its gas storage space over
the whole drawdown period compared with an average of 53% over
the previous decade.
The region has entered the 2023 refill season with storage
almost 56% full on March 31, a record high for the time of year,
compared with 26% at the same point in 2022 and a ten-year
average of 33%.
The outlook for the rest of 2023/24 is therefore very
different from 2022/23. Europe will need a smaller-than-average
refill in 2023 which should relieve some of the upward pressure
on prices.
Even if storage is topped up to the maximum, however, Europe
will still need to discourage consumption next winter, which is
likely to require some combination of industrial closures,
recession and high prices later in the year.
Related columns:
– Europe makes moderate progress reducing gas demand (March
20, 2023)
– Europe must prepare for next winter to be colder (March
15, 2023)
– With winter almost over, Europe’s gas stocks are at
seasonal record high (March 3, 2023)
– Europe should thank mild autumn for averting gas crisis
this winter
John Kemp is a Reuters market analyst. The views expressed
are his own
(Editing by Kirsten Donovan)
