A lack of commercial interest in some German storage sites could support European injection demand in the third quarter, when Asian summer demand peaks.
Operators are struggling to sell underground storage capacity at the 45TWh Rehden and 11.5TWh Breitbunn sites — probably because the German THE hub's prompt discount to the winter contract is not large enough to cover the reserve price. In Rehden, only 900GWh has been allocated of the 20.5TWh needed to reach the 45pc fill target.
A inverted summer 2025-winter 2025-26 spread earlier this year provided no incentive for firms to book space ahead of the storage year, and although the spread normalised last month, it remains too narrow to make some sites attractive. In addition, Rehden is slow-cycling, so capacity holders have less flexibility to react to price movements.
That said, these sites would still need be filled at some point this summer to help meet demand in Germany during winter plus EU and German mandates for 1 November.
The lack of a commercial incentive to fill storage could prompt the intervention of market area manager THE later in summer, either by subsidising injections — as Italy did in early April — or through direct purchases, as THE did in 2022.
THE said on Monday that it currently has no plans to intervene. But an intervention, if any, would probably only take place later in summer, as Rehden injections could start as late as 17 August to reach the 45pc fill target for 1 November.
Asian demand
Europe's stockbuild has benefited from weak Asian demand, but firms delaying injections to the third quarter are likely to contend with tighter LNG supply as northeast Asian demand peaks.
Asian summer imports tend to be at their heaviest in July-August, when high temperatures boost air-conditioning use and power-sector gas burn. LNG imports in China, South Korea, Japan and Taiwan in July-August have on average increased by 6.4pc from May-June over the last three years, according to Kpler data, equivalent to 2.2mn t, or 30 LNG cargoes, over the two months.
The European delivered discount to the TTF third-quarter contract has already started to narrow on stronger buying interest from Asia, falling to a 45¢/mn Btu discount from an average discount of 52¢/mn Btu the previous week.
That said, part of the increase in Asian demand in the third quarter could be offset by weaker consumption from downstream sectors affected by US tariffs. And Asian delivered LNG prices above $11/mn Btu will probably continue to suppress demand from price-sensitive buyers in China and India, reducing competition for uncommitted Atlantic-basin supply.
