Germany’s gas supply faces major uncertainties this coming winter

The Strait of Hormuz, which remains effectively closed, continues to create market uncertainty, as significantly less liquefied natural gas (LNG) is available globally. In a TV interview with MDR Thüringen, Professor Goldthau explains that gas storage levels are at historically low levels, and that the mandated refill targets are unlikely to be met by November. He warns that it would be best if nothing went wrong this winter. In his assessment for the Science Media Centre Germany, the risks currently affecting the supply situation are not fully reflected in the expectations of the futures markets. Goldthau describes the situation as a sort of “shock freeze” amongst traders. He notes that there is considerable uncertainty regarding future price trends.

In interviews with the Frankfurter Allgemeine and the Süddeutsche Zeitung, Professor Goldthau points to likely price spikes during the winter period. Given the tight supply situation, even isolated regional events could therefore have an impact on the international gas market – for example, potential disruptions caused by hurricanes affecting US LNG facilities, or a strike at Australian export terminals. As an extreme scenario, he tells Handelsblatt, US export licences for LNG could be called into question or revoked, which could reduce available supply and cause European gas prices to soar. Disruptions to Norwegian pipeline supplies would be equally damaging.

Overall, the European gas market remains shrouded in deep uncertainty ahead of the winter. Looking ahead, Goldthau calls for a review of the regulatory governance model for the German gas storage sector. As he suggests to SMC, neighbouring European countries such as France and Italy may offer best practice, as storage levels there are significantly higher despite a similar price environment.