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Europe is threatened by a gas emergency ā€“ empty storage facilities and exploding prices

From Blackout- News

European gas storage facilities are emptying faster than expected. Traders are betting on rising prices, while the planned subsidy from Economics Minister Habeck is receiving sharp criticism. According to data from Gas Infrastructure Europe, storage facilities are currently only 49 percent full (as of February 8, 2025). By comparison, the filling level in the previous year was around 67 percent. Meanwhile, gas prices are reaching a level not seen for two years (berliner-zeitung: 10.02.25).

A gauge sits on pipework on top of a storage silo as construction work continues at the liquid natural gas (LNG) terminal, a unit of Electricite de France (EDF) SA, in Dunkirk, France, on Tuesday, March 15, 2016. The terminal, near the Belgian border, is poised to go into operation as LNG tankers head to Europe after demand waned elsewhere. Photographer: Jasper Juinen/Bloomberg

Traders are betting on price increases

European gas traders are speculating on a significant increase in gas prices by the summer. According to the Bloomberg news agency, prices could rise to 80 euros per megawatt hour. This trend has driven the shares of investment funds that rely on rising gas prices to almost a record high. Many retailers are now refraining from buying gas for the summer months. This carries the risk that the storage facilities for the coming winter could be insufficiently filled.

European gas stocks are falling faster than expected ā€“ storage facilities are only 49% full ā€“ traders expect prices to explode

The EU had introduced fixed stock targets in 2022 to secure energy supplies. By November 1, the storage facilities in each member state must be at least 90 percent full. Normally, traders buy their gas cheaply in summer and sell it more expensively in winter. But the current price structure makes this model unprofitable. Higher summer prices ensure that retailers do not fill their storage facilities in the first place.

Legal requirements under pressure

Low temperatures in winter and so-called dark doldrums put an additional strain on the gas supply. In addition, there is the end of Ukraine transit, which further increases the pressure on the market. The reference price TTF, the most important indicator for European gas trading, is at its highest level in two years.

Despite the tense situation, the Federal Network Agency (BNetzA) is relaxed. A spokeswoman told the Berliner Zeitung that the gas supply in Germany remains stable. “The security of supply is guaranteed,” is the assessment. Nevertheless, economical use of gas remains crucial to avoid bottlenecks.

Subsidies exacerbate the problem

Another driver of the rising prices is the planned subsidy from Economics Minister Habeck. This is intended to compensate gas traders for the unprofitable business of summer filling. Trading Hub Europe (THE), market area manager in the German gas market, confirmed on request that a subsidy for storage is imminent.

Experts are critical of the subsidy. James Waddell of Energy Aspects Ltd. warns that such measures could push summer prices further up. The American consulting firm Auxilione also sees risks. The subsidy would put an even greater burden on the so-called summer-winter spread ā€“ the price difference between summer and winter contracts.

“Europe is currently on a downward curve,” explains Francisco Blanch, commodity strategist at Bank of America. Retailers have little incentive to build up inventory. The legal requirements are also increasing prices, so that gas storage is becoming less attractive. Blanch only sees price volatility as a way to make a profit.