INTERACTIVE: Gas storage injections to remain high in early July

LONDON (ICIS)–Low day-ahead prices at key European gas hubs indicate that storage injections will remain profitable at least for the first half of July, ICIS analysis shows.

In the second half of the month, storage injections may be reduced as maintenance on the Russian Nord Stream pipeline restricts gas supply to northern Europe.

During June, shippers added close to 10 billion cubic metres (bcm) of gas to storage sites across Europe.

This is slightly more than over the same period last year and almost 2bcm higher than in 2017.

Storage sites currently hold more than 59bcm of gas and are over 70% full. They did not reach this level until early September in 2017 or 2018.

Despite the high levels of gas in store, injections are likely to continue in the early part of July.

On Thursday, the TTF Day-ahead closed €0.75/MWh below August ‘19, which will become the front-month contract from Monday.

The spread between the day-ahead and front-month contracts is an important indication of whether storage injections are profitable.

Day-ahead prices below the front month indicate that shippers should inject now to lock in the cheapest price, while a front-month premium suggests they should wait to take advantage of a cheaper price later in the summer.

With stocks fuller than last year, shippers can pay more attention to pricing signals as there is less urgency to fill storage sites for security of supply reasons.

During June, day-ahead prices at the TTF have been on average €0.20/MWh below the front month.

NORD STREAM IMPACT

In the second half of July, annual maintenance will take place on the Russian Nord Stream pipeline.

This is likely to reduce injections, particularly in Germany where the pipe enters Europe, due to falling gas supply.

If necessary, sites may even briefly flip to withdrawals during the maintenance period.

The same is likely to be true during scheduled maintenance at Norway’s Troll field and Kollsnes processing plant in late August.