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LNG: Possible German Refilling Subsidies Already Pushing Summer Prices Up

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European natural gas trended lower on Wednesday to be down 2.5% to EUR 48.80 just off the intraday low of EUR 48.51. It is now close to unchanged in January. Futures prices are over EUR 48.50 for contracts until July but by October they are below EUR 47 as the market adds a summer refilling premium given lower inventories and German refilling subsidy considerations. Despite being winter, the December contract is below July at EUR 44.39. 

  • The risk with German subsidies is that it could distort prices upwards, which would then pressure other countries to subsidise their own summer storage refilling. Summer contract prices have already risen since the German news. The upcoming German election on February 23 also adds uncertainty as to whether this proposal will go ahead.
  • Bloomberg reported that hedging costs against higher gas prices in the summer have risen.
  • Weather- and power-related disruptions to US LNG export facilities may also reduce supplies arriving in Europe. While US and EU sanctions on Russian gas could be extended, especially if Russia doesn’t negotiate a peace for Ukraine.
  • US natural gas prices rose above $4.00 on Wednesday as forecasts of colder weather drove a 6.5% increase. They are 1.3% higher this week and 10.1% in January.
  • EIA US gas inventory data is released later today. They were 2.5% above the 5-year average as of January 10.
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European natural gas trended lower on Wednesday to be down 2.5% to EUR 48.80 just off the intraday low of EUR 48.51. It is now close to unchanged in January. Futures prices are over EUR 48.50 for contracts until July but by October they are below EUR 47 as the market adds a summer refilling premium given lower inventories and German refilling subsidy considerations. Despite being winter, the December contract is below July at EUR 44.39. 

  • The risk with German subsidies is that it could distort prices upwards, which would then pressure other countries to subsidise their own summer storage refilling. Summer contract prices have already risen since the German news. The upcoming German election on February 23 also adds uncertainty as to whether this proposal will go ahead.
  • Bloomberg reported that hedging costs against higher gas prices in the summer have risen.
  • Weather- and power-related disruptions to US LNG export facilities may also reduce supplies arriving in Europe. While US and EU sanctions on Russian gas could be extended, especially if Russia doesn’t negotiate a peace for Ukraine.
  • US natural gas prices rose above $4.00 on Wednesday as forecasts of colder weather drove a 6.5% increase. They are 1.3% higher this week and 10.1% in January.
  • EIA US gas inventory data is released later today. They were 2.5% above the 5-year average as of January 10.