Abstract

One of the cornerstones of the novel Energy Security Strategy adopted by European Union Member States is to reach 90% of Natural Gas Storage refill by the start of the Winter Season. November 2023 marked the all-time high record in European Union Storage Refill level at 99.4% of Technical Storage Capacity. Counterintuitively and in the absence of measurable shocks to Natural Gas supplies or of significant sources of Natural Gas demand, Winter 2023-’24 Draw Season has shown an unusually high level of storage depletion, especially when contrasted with Winter 2022-’23. Comparatively elevated Summer Season wholesale Natural Gas prices contrast with weaker Winter Season price dynamics in what now is a low(er)-demand Natural Gas market in Europe after the Russian Federation invasion of Ukraine. The new Eu Regulation on Minimum Storage Requirements may have paved the way for Natural Gas Storage System Operators and Wholesale Merchants to offload higher fractions of accumulated reserves into the 2023-’24 Winter Season than those needed to balance out the small Supply/ Demand gaps witnessed during such timespan. The goal of which could be twofold: a. minimize the Cost of Storage of what would otherwise be an excessively elevated level of Stocks to carry forward into the following Winter Season; b. minimize the negative gap between what we assume is a fully Lifo-based average price of the Injection Season Natural Gas storage accumulation phase and the ensuing weaker winter price dynamics witnessed during the last two Winter Seasons. Depleted storage volumes may have been marketed at backwards-looking, sticky price levels not fully reflective of the lower wholesale Natural Gas prices prevailing between November 2023 and March 2024. The rigidity of the new Eu Storage Regulatory Framework may be feeding into adaptive strategic behaviours of Ssos and Merchants with negative consequences for Household and Industrial Customers especially in those National Markets more heavily reliant on Natural Gas for their marginal auction-based wholesale Electricity price formation mechanism. All of which conspires to further diminish the likelihood to see electricity bills decreasing in synch with falling wholesale Natural Gas prices.