(Bloomberg) — European natural gas for delivery this summer has become even more expensive than prices for next winter after Germany’s market manager said it’s discussing subsidies for refilling storage sites.
The summer contract is trading at the biggest premium since 2022 and is priced around €4.8 a megawatt-hour higher than the winter price. The spread started widening late last year due to concerns over supply risks in 2025, and has drawn attention because it risks discouraging traders from stockpiling during summer.
Maintaining sizable fuel inventories has become crucial for Europe’s energy security since it lost most Russian pipeline flows, as it provides a cushion against demand spikes during the heating season. Should Germany go ahead with subsidies for storage injections, it could put pressure on other gas-storing nations in Europe struggling to replenish inventories because of the widening price gap.
To incentivize storage refills, Germany’s natural-gas market manager Trading Hub Europe is discussing a possible subsidy with regulators, for which it unveiled the latest considerations on Tuesday. The premium widened further — doubling over the past two days — after the report was published, as it suggested that summer gas may be purchased despite higher prices.
“Interference in the market just works as an incentive to push the price higher in the front, making the situation even worse,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management in Copenhagen.
“The more states intervene with either subsidies for injections or penalties for non filling the more it will distort the price signals that would normally encourage firms to book storage,” said James Waddell, head of European gas and global LNG at Energy Aspects Ltd.
Meanwhile, adding to the bullish sentiment, a historic winter storm is disrupting natural gas shipments from a major US export plant and causing widespread transportation disruptions in the south. The Freeport LNG complex has shut down, citing “intermittent” power interruptions.
Traders are also awaiting further moves from US President Donald Trump. He said he’s likely to impose sanctions on Russia if President Vladimir Putin doesn’t come to the table to negotiate about the war in Ukraine. The US has already imposed sweeping energy sanctions on Russia, including on some of the nation’s LNG projects.
Low-wind conditions in Europe on Wednesday also added to demand for gas for power generation. The cost of hedging against surging prices for the upcoming stockpiling season has also gone up.
Dutch front-month futures, Europe’s gas benchmark, slipped 1.8% to €49.15 a megawatt-hour at 2:43 p.m. in Amsterdam.
–With assistance from Petra Sorge and Eva Brendel.
©2025 Bloomberg L.P.
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Publish date : 2025-01-22 07:14:00
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