Unlike in the United States, where natural gas inventories just before winter are above average, European storage levels at the end of October were significantly lower than normal for this time of year. For 2007-12, European gas storage averaged more than 94% full in the final week of October. This year, it’s at 84% full. The lower storage level is largely a result of heavy withdrawals earlier in the year because of cold March weather. Europe, like the United States, this year experienced an unusually cold March, the fourth coldest on record (since 1910) in the United Kingdom and the sixth coldest on record (since 1881) in Germany.
Overall, European natural gas storage levels were fairly normal as the year began. However, by the end of March, European storage was just 24% full, versus a 2010-12 average of 41% full for that time of year. The natural gas storage deficit compared to previous years widened as withdrawals from storage continued into mid-April and as May and June injections got off to a slow start. With relatively low imports in the first half of 2013 and declining production, Europe’s storage levels still have not fully recovered. While the United States also experienced an unusually cold March and heavy March withdrawals from natural gas storage, strong U.S. production growth has helped return U.S. storage levels to near least year’s record highs.
Natural gas storage levels at the end of October this year vary across Europe, and in some regions storage levels have recovered since spring lows. For example, United Kingdom gas storage increased to 98% full this October compared with a 2010-12 average of 94%, while Denmark and the Netherlands were 82% full versus a prior average of 85%. However, natural gas storage levels in most of the rest of Europe remain low, with storage in the Baumgarten area – which covers Austria, Czech Republic, Hungary, Poland, and Slovakia – at just 72% full at the end of October versus an average of 87% full for the previous three years. Storage levels in Germany, Belgium, France, and Italy are also significantly below normal for this time of year.
Spot prices fell throughout the country as demand declined in the residential/commercial and power sectors. The combined effect of reduced natural gas demand from residential and commercial consumers as temperatures warmed in the Northeast, Midwest, and Southeast, as well as reduced natural gas demand from electric generators, likely pushed the Henry Hub spot price down for the third week in a row, to its lowest point since the middle of August. The Henry Hub spot price decreased by 10 cents this week, to $3.45/MMBtu yesterday, from $3.55/MMBtu last Wednesday. The price drop was particularly strong in the Northeast, where the spot price at the Algonquin Citygate, which serves the Boston area, fell by 63 cents to $3.63/MMBtu, and where the spot price at Transco Zone 6 New York, delivering to New York City, fell by 33 cents/MMBtu to $3.29/MMBtu. While the Algonquin Citygate spot price settled yesterday at 18 cents/MMBtu above the Henry Hub spot price, the Transco Zone 6 New York spot price settled at a 16 cent/MMBtu discount to Henry Hub. Supply factors also played a role in lowering prices at Transco Zone 6 New York, as consumers served by this trading hub benefitted from a number of pipeline expansions that began service in the region on Friday, November 1.