European buyers are poised to continue attracting the bulk of LNG cargoes within the Atlantic basin and sustain the present import level in September-October, which could lead to more interest in underground storage capacity bookings.
Europe has maintained quick LNG imports thanks to weak demand and new production capacity in the Pacific basin so far this summer. The US exported an average of 2mn t a week in July, while Europe imported roughly the same amount of LNG in the same period, according to ship tracking data from Kpler.
Quick LNG imports have supported European injections. Firms have on average injected 306mn m³/d into the EU's underground storage facilities in July, according to GIE data, in comparison with the bloc's average daily LNG import equivalent of 351mn m³/d.
European firms are poised to keep attracting uncommitted LNG cargoes within the Atlantic basin in September-October, market participants said. Although northeast Asian delivered prices hold premiums just enough to cover extra shipping costs for Atlantic cargoes, there is not enough buying interest in the region, they added.
Firms would fill all reserved underground storage space by 26 September if injections continued at the same pace as over the past two weeks. All reserved capacity in the German market — 70pc of capacity — as of the morning of 5 August would be filled by 9 September with the country's injection pace over the past two weeks.
Continued quick LNG deliveries, combined with well-filled booked capacity limiting injection demand, could leave firms with spare supply in September-October and potentially open up storage spreads, especially if weather is mild in autumn. Firms may seek to book and make use of additional storage capacity.
Prompt prices collapsed in autumn 2022 relative to later in the winter because of a combination of weak heating demand, ample supply availability and nearly-full storage sites. The balance-of-month discount to the first-quarter 2023 contract soared to €107/MWh in the last week of October from an average €47.46/MWh earlier the month.
Storage operators such as Sefe are "monitoring the market closely and are ready to market [our] available capacities at short notice", the firm told Argus. Sefe operates Germany's Rehden site, the most underbooked in Europe, with 10.4TWh of capacity reserved for the 2025-26 storage year as of Wednesday afternoon, out of a total 44.7TWh. Rehden's stockfill needs to reach 20.1TWh — 45pc of capacity — to comply with Germany's storage targets.
Price incentives can, however, shrink quickly after successful auctions as firms buy gas on the prompt and sell forward winter contracts to lock in spreads. This supports balance-of-summer prices relative to the winter contract, reducing their discount and capping the incentive for injections and further bookings.
German operators allocated 5.18TWh on 8 July, after the THE balance-of-summer-winter 2025-2026 discount reached €2.09/MWh at the previous close. The spread shrank to -€1.64/MWh a day later and remained below the €1.80-2/MWh threshold needed to profitably book and make use of space at Rehden over the coming days, leading to no uptake at a later auction at that site on 15 July. The THE balance-of-summer-winter spread closed at €1.82/MWh on 5 August.
Underground storage or floating LNG?
Firms may be concerned about committing to underground storage capacity because of the upfront cost, while floating loaded LNG vessels could offer some flexibility with lower upfront costs.
It would cost a firm 6.2¢/MWh a day to float a laden LNG vessel, based on the forward ARV5 freight rate for November and the present northwest Europe forward price. The daily cost decreases to 3.4¢/MWh a day if a firm considers its charter cost sunk. Firms may find floating an LNG carrier cheaper as a storage option than underground storage priced at €2/MWh if the storage period lasts for less than 59 days without charter costs, or 32 days with charter costs. And there is no additional upfront cost in floating an LNG carrier other than the charter cost.
That said, the forward curve does not incentivise floating a cargo and only a limited incentive for booking underground storage capacity.
Firms may have also been concerned about running out of time for injections before winter starts, but storage operator Sefe for example offered additional injection capacity in its latest offer at Rehden on 6 August. Firms would need 32 days to fill up a single bundle at the Rehden site, down from 64 days needed previously, based on the product offered in the past two auctions. There are 69 days for injection before November if considering Rehden's 18-day maintenance in October.
That said, injections at Rehden exceeded booked capacity and reached their technical maximum in several days of July, suggesting that additional injection capacity has also been made available to firms that already held space at the site.
