LNG supply to Europe set for 'material increase' in coming weeks: Axpo

Switzerland-based trader Axpo said Feb. 10 it expected a "material" increase in LNG supplies to Europe in the coming weeks, with prices already pointing to Europe attracting additional LNG cargoes.

In a market outlook, Axpo said the gas market remained tight, with European storage levels well down on both 2024 and the five-year average.

According to data from Gas Infrastructure Europe, EU gas storage sites were filled to just 49% of capacity as of Feb. 8.

"This tighter set-up makes an end-winter storage level in the 30% range more likely. This will leave a big gap to fill by Nov. 1 to reach the EU's 90% target," it said.

"One way to address this challenge is by attracting additional LNG cargoes to Europe. Prices are already signaling this, and we expect a material increase in LNG arrivals at European shores during the coming weeks," it said.

"However, whether this is sufficient to help fill the storage gap remains to be seen."

Axpo said windless and cooler weather than last year, combined with the end of Russian gas deliveries via Ukraine, drove the biggest January withdrawal from EU storage since 2021.

Two-year highs

European gas prices have surged to two-year highs in recent days on the back of storage concerns and cold weather.

Platts, part of S&P Global Energy, assessed the benchmark Dutch TTF month-ahead price on Feb. 7 at Eur55.56/MWh, the highest level since Feb. 6, 2023.

On a $/MMBtu basis, the TTF month-ahead price assessment of $16.83/MMBtu was also higher than the Asian JKM equivalent of $16.32/MMBtu the same day.

Under the EU's gas storage regulation adopted in June 2022, mandatory storage targets are set for member states including interim filling levels that should be reached.

The Nov. 1 target of 90% fullness at the EU level will be the last before the regulation expires at the end of 2025 unless the rules are extended or new arrangements put in place.

Equinor CEO Anders Opedal said last week that Europe would need additional LNG cargoes to help refill stocks.

"If you want to go back to 90% storage levels, Europe needs to attract 230 more LNG cargoes than last year, which represents around a 20% increase," Opedal said.

"I think that demonstrates the competition for LNG that we will see between Europe and Asia over the summer," he said.

Storage incentives

The market also remains concerned about storage filling this summer given an inverted summer-winter spread.

German gas market manager Trading Hub Europe on Jan. 21 unveiled plans for a new gas storage product designed to encourage market participants to inject gas into storage sites despite insufficient seasonal spreads.

The focus of the product concept is to subsidize new injections and provide incentives for storing gas, a THE spokesperson told S&P Global Energy.

Axpo said that Germany and other countries were now sketching out how subsidy mechanisms may look to fill their out-of-the-money (OTM) storage.

"Overall, Europe's hefty storage requirement this summer and the uncertainty surrounding regulatory intervention are setting up a strong, if volatile, gas market over the coming months," it said.