May 21, 2025
Unsold German storage reduces the global LNG balance for the third quarter.
A lack of commercial interest in certain German storage facilities may support European injection demand in the third quarter, coinciding with peak summer demand in Asia.
Operators are finding it difficult to market underground storage capacity at the 45TWh Rehden and 11.5TWh Breitbunn sites, likely due to the insufficient prompt discount of the German THE hub relative to winter contracts to cover reserve prices. In Rehden, only 900GWh of the 20.5TWh required to achieve the 45% fill target has been allocated.
An inverted summer 2025-winter 2025-26 spread early this year discouraged firms from reserving space in advance, and although the spread normalized last month, it remains too narrow to attract interest in some sites. Additionally, Rehden's slow-cycling nature limits capacity holders' flexibility to respond to price changes.
Nevertheless, these sites must still be filled this summer to meet winter demand in Germany and comply with EU and German mandates by November 1.
The lack of a commercial incentive for filling storage may lead the market area manager THE to intervene later in the summer, possibly by subsidizing injections, similar to Italy’s actions in early April, or through direct purchases like those made by THE in 2022.
THE announced on Monday that there are currently no plans for intervention, but any potential action would likely occur later in the summer, as injections at Rehden could start as late as August 17 to reach the 45% fill target by November 1.
European stock builds have benefitted from low Asian demand, but firms postponing injections until the third quarter may face tighter LNG supply coinciding with northeast Asia's peak demand.
Asian summer imports typically surge in July-August due to increased air-conditioning use and gas consumption in the power sector. According to Kpler data, LNG imports in China, South Korea, Japan, and Taiwan during July-August have averaged a 6.4% increase from May-June over the past three years, amounting to 2.2 million tons, or approximately 30 LNG cargoes.
The European delivered discount to the TTF third-quarter contract has already decreased due to heightened buying interest from Asia, dropping to a 45¢/mn Btu discount from an average of 52¢/mn Btu the prior week.
However, some of the anticipated rise in Asian demand this quarter might be counterbalanced by reduced consumption from downstream sectors impacted by US tariffs. Additionally, Asian delivered LNG prices above $11/mn Btu are likely to dampen demand from price-sensitive buyers in China and India, leading to less competition for uncommitted Atlantic-basin supply.
Operators are finding it difficult to market underground storage capacity at the 45TWh Rehden and 11.5TWh Breitbunn sites, likely due to the insufficient prompt discount of the German THE hub relative to winter contracts to cover reserve prices. In Rehden, only 900GWh of the 20.5TWh required to achieve the 45% fill target has been allocated.
An inverted summer 2025-winter 2025-26 spread early this year discouraged firms from reserving space in advance, and although the spread normalized last month, it remains too narrow to attract interest in some sites. Additionally, Rehden's slow-cycling nature limits capacity holders' flexibility to respond to price changes.
Nevertheless, these sites must still be filled this summer to meet winter demand in Germany and comply with EU and German mandates by November 1.
The lack of a commercial incentive for filling storage may lead the market area manager THE to intervene later in the summer, possibly by subsidizing injections, similar to Italy’s actions in early April, or through direct purchases like those made by THE in 2022.
THE announced on Monday that there are currently no plans for intervention, but any potential action would likely occur later in the summer, as injections at Rehden could start as late as August 17 to reach the 45% fill target by November 1.
European stock builds have benefitted from low Asian demand, but firms postponing injections until the third quarter may face tighter LNG supply coinciding with northeast Asia's peak demand.
Asian summer imports typically surge in July-August due to increased air-conditioning use and gas consumption in the power sector. According to Kpler data, LNG imports in China, South Korea, Japan, and Taiwan during July-August have averaged a 6.4% increase from May-June over the past three years, amounting to 2.2 million tons, or approximately 30 LNG cargoes.
The European delivered discount to the TTF third-quarter contract has already decreased due to heightened buying interest from Asia, dropping to a 45¢/mn Btu discount from an average of 52¢/mn Btu the prior week.
However, some of the anticipated rise in Asian demand this quarter might be counterbalanced by reduced consumption from downstream sectors impacted by US tariffs. Additionally, Asian delivered LNG prices above $11/mn Btu are likely to dampen demand from price-sensitive buyers in China and India, leading to less competition for uncommitted Atlantic-basin supply.