Germany Misses Gas Storage Target as Prices Soar

Germany has fallen short of its winter gas storage goal, leaving the nation in a precarious heating season. EU's largest economy now confronts a difficult time as the European gas benchmark has remained above 100 euros per MWh since the previous week. While higher prices may appear to be the lesser issue, a supply shortage would prove far more devastating.

Every EU member state is required to ensure enough natural gas ahead of winter to fill 80% of storage capacity. However, Germany has only managed to fill its storage to around 61%, a figure falling short of the EU's mandated 80%. Germany possesses the EU's most significant gas storage capacity, accounting for over a fifth of the bloc's total capacity, and is also the biggest consumer of natural gas in the EU.

Concerns about Germany's gas storage levels have been circulating for weeks, with the gas storage association INES warning that Germany would only be able to fill caverns to 77% by November 1 at the current LNG purchase rate. The association has since issued another warning, stating that storage level targets for upcoming winters must be firmly guaranteed due to the Middle East war making gas storage refilling uneconomical.

Gas purchases are expected to become even more costly as tensions escalate following the U.S. midterm elections and QatarEnergy's extension of force majeure on LNG exports. Germany's INES has called for the state to step in to secure enough gas for the winter, proposing a storage obligation for suppliers. However, some argue that meeting storage targets is not as critical as securing a secure gas supply.

Germany's energy market regulator believes that prompt LNG purchases during the winter would suffice, despite the fact that gas prices have soared. As gas prices show no signs of dropping, Germany may have to rely more on coal, making what many see as a polluting fuel profitable again.