Russia's Gazprom warns of 'tough' European gas storage injection season

London — Russia's Gazprom has warned that Europe's gas injection regime this summer will be "even tougher" than previously assumed after cold weather through April saw some storage sites switch back to withdrawals.

According to data from Gas Infrastructure Europe, the EU's gas storage sites, as of April 18, were just 28.97% full, holding 323 TWh (30.5 Bcm) of gas.

This is half the level of stocks compared with the same time last year.

"Europe has been set back almost a month in terms of injecting gas into its underground storage facilities," Gazprom said in a market commentary late April 19.

Gazprom estimated that some 66.4 Bcm of gas had been withdrawn from European storage sites since the start of the heating season last October. "These are record figures," it said.

"Less and less time is left to replenish such a considerable amount of gas," it said. "This means that the gas injection regime this summer will be even tougher than previously thought."

It pointed to particularly low levels of storage in the Netherlands, which is 18% full, and Austria, which is 22% full.

Despite having started the withdrawal season in October with its storage facilities almost 100% full, Europe saw its stocks emptied at rates not seen since the Beast from the East weather event in 2018 after cold weather in January and February.

The cold start to April meant re-stocking has had to wait, narrowing the window of opportunity to refill sites.

In the key northwest European market, S&P Global Platts Analytics said the start of gas injection season had been delayed with April temperatures set to out-turn around 2 degrees C below seasonal normal.

"However, even assuming zero injections in April, we still expect northwest European storages to fill to 95% by the end of October as a rebound in pipeline supply and US LNG dispatching at full capacity will offer plenty of opportunity for injections," it said April 20.

LNG competition

The International Energy Agency last week warned that the current low level of European gas storage could see increased competition for LNG this summer between European and Asian buyers.

Withdrawals from European storages were 55% higher compared with last year in the October-March period, accounting for close to 20% of total gas supply, according to the IEA.

"Low inventory levels could translate into higher gas injections through the summer of 2021, providing additional market space both for LNG and pipeline suppliers," the IEA said in its latest quarterly gas market report.

Gas storage sites started the heating season with inventory levels 12% above their five-year average.

But they had fallen to 10% (or 3.7 Bcm) below the five-year average by the end of March due to lower LNG imports and high demand, the IEA said.

LNG cargoes were drawn to the Asian market in January and February due to high spot prices.

The S&P Global Platts JKM benchmark spot Asian LNG price hit an all-time high of $32.50/MMBtu in mid-January due to a combination of incremental gas demand in Northeast Asia, limited storage capacity and regional liquefaction outages.

The JKM marker for June delivery hit a 10-week high on April 19 of $8.56/MMBtu, the highest since Jan. 29, Platts data showed, driven by European market strength and continued buying interest for June deliveries in the lead-up to the summer season.