Germany Weighs Market Incentives as Gas Storage Levels Plummet

Germany is struggling to fill its gas storage facilities ahead of winter, and the government is weighing market incentives to encourage traders to raise levels. German gas sites are currently barely half full, a historically low level at 56% capacity as of mid-September, according to Gas Infrastructure Europe data. Soaring natural gas prices amid the Middle East crisis have deepened the backwardation structure, discouraging holding supply for later deliveries.

The existing market tool, the autumn tender for Long Term Options, or LTOs, may be expanded on a larger scale to boost storage levels. Germany's government is hesitant to resort to direct state purchases of gas, as it did in 2022, but has agreed with state-held energy firms Uniper and SEFE that they would inject more gas into their storage facilities.

Industry association INES warned last week that refilling has 'fallen significantly short of the required pace so far this year' and that 'the window for sufficient refill is closing.' Filling storage facilities must be economically viable if market participants are to actually carry it out, according to INES Managing Director Sebastian Heinermann.