Flagship Energy’s Tejal Shah Energy Markets Update – 2nd April 2025

Welcome to April and officially the summer period in the UK and EU gas markets. Focus now appears to be shifting towards the fundamentals and more importantly how storage will be filled to 90% by 1^st November. We have ended the winter with gas storage at its lowest levels since 2022. Typically, gas is injected into storage in summer when prices are cheaper, ready to sell when demand rises in the winter, allowing traders to make a profit. However, this year prices have remained elevated – colder temperatures compared to the last two years and the end of Russian gas through the Ukrainian transit route. This has in turn driven summer prices higher than those for next winter and essentially removed the financial incentive for storage trades. Although prices have recently reversed, concerns have already been priced in and the coming weeks will be quite telling on how injecting gas this summer will go. With more gas to buy and fewer supplies coming by pipeline, Europe will need to rely on globally traded LNG and pay a premium to attract cargoes in competition with buyers in Asia. According to Reuters calculations and analytics firm Kpler, Europe may need up to an extra 250 cargoes of LNG this year costing at least $11 billion to refill its depleted gas stores ahead of winter, with Ukraine requiring at least another 30 cargoes. The European Commission is due to release a statement on storage regulations however recent proposals and discussions about flexibility on the timing of the targets have already created huge uncertainty. What is known is that there is a big risk for the coming winter if storage levels are not full, especially if the region is hit with colder than normal weather conditions or unplanned outages.