After winter is before winter. Germany came through the heating period with well-stocked gas storage tanks. But now the focus is again on the forthcoming LPG shopping season. One thing already seems certain: a renewed price explosion like a year ago after the start of the Ukraine war is unlikely.
A year ago, Germany made itself unpopular with its EU partners. Even before Russia completely stopped pipeline deliveries via the Nord Stream 1 gas pipeline last August, the gas flow had decreased. German companies in particular bought the gas market practically empty last summer in order to fill the local storage facilities in good time.
At that time there was an unprecedented price rally in the EU. In August, liquid gas reached the level of more than 340 euros per megawatt hour at the TTF trading point in the Dutch gas network. Smaller EU countries with less market power, such as Greece, were left behind.
The market situation suggests that gas can be procured at largely reasonable prices this spring and summer.
Gregory PettChief Analyst at Uniper
Now the storage season begins again. From April onwards, more will be stored in the stores than taken out. In the meantime, however, the EU has learned a lesson from last summer’s cut-throat competition. At the end of last year, the EU states agreed on a so-called gas emergency regulation. It stipulates that companies must purchase at least 15 percent of storage requirements via a common EU purchasing platform. The aim is to negotiate cheaper prices for all EU countries.
Even if the federal government was initially skeptical about joint gas purchases during the political consultations in Brussels, there is now a firm will to show solidarity. “I am confident that the joint procurement of gas by the EU member states will succeed,” said Bernd Westphal, the economic policy spokesman for the SPD parliamentary group in the Bundestag, the daily mirror. “There will be no competition to outbid each other,” he predicted. In addition, the joint gas procurement is an “important signal of unity and solidarity within the European Union”.
In addition to the obligation to work together in the EU, there is another reason why politicians in Germany are relatively relaxed about the next winter: Contrary to the horror scenarios, the storage tanks remained well filled over the winter. Most recently, according to the European gas storage association GIE, the fill level in Germany was 64.1 percent. In addition, gas prices are far from the highs of last summer.
At least Gregor Pett, chief analyst at Germany’s largest gas wholesaler Uniper, believes that this will remain the case for the foreseeable future. In his opinion, the current market situation and the fundamental data suggest “that gas can be procured at largely reasonable prices this spring and summer and that, from today’s perspective, the extreme price rally of the past year will not be repeated”. However, this should not hide the fact that “if critical infrastructure fails and there is an unexpectedly strong increase in demand, prices can rise again significantly over the course of the year,” said Pett.
Simone Tagliapietra, energy policy expert at the Bruegel think tank in Brussels, takes a similar view. “We’re in a good position,” he said. The current gas supply in the EU cannot be compared with the “dramatic emergency situation a year ago”.
Meanwhile, the EU Commission is concentrating on preparing the joint gas purchasing of companies from across the EU. The Leipzig platform Prisma is currently being set up for this purpose. The companies should use the platform to conclude contracts with gas export companies – for example in the USA or Norway. In the current phase, companies can register their storage requirements across the EU. “We expect that the first contracts between the companies and the gas exporters will probably be concluded before the summer,” said a spokesman for the EU Commission.
However, market experts warn that the joint purchasing platform could possibly only have a minor effect – namely if not enough companies register their energy requirements across the EU.
The Vice President of the EU Commission, Maros Sefcovic, who is responsible for the project, is counting on active participation by companies from particularly energy-intensive sectors such as the cement and steel sectors. In the course of this month, the Slovakian politician hopes, there will be an initial list of the joint gas requirements of large European companies.
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