Reading energy news in mid-August risks leaving you disoriented. On the one hand there are the reassuring data on Italian gas storage, which have already exceeded 78% of their total capacity. On the other hand come the alarms from Oxford Economics analysts, according to which Europe does not have to fear the summer heat but the dangers of next winter.
But the sound of the two bells does not clash, on the contrary, they are harmonized: the scores are simply written in two different keys, because they speak of two different aspects of the energy market.
How much gas we consume and how much we manage to conserve
To understand the size of the problem we need to look at the numbers of national needs. Italy consumes on average between 60 and 65 billion cubic meters of gas per year, with a strong concentration in the winter months between domestic heating, electricity production and the industrial sector.
The total capacity of Italian underground storage is approximately 16.5 billion cubic meters, of which approximately 4.5 billion represents the strategic emergency reserve. Saying that they were 78% filled means having deposited around 12.5-13 billion cubic metres. Taking into account that in the coldest winter months in Italy between 300 and 350 million cubic meters per day are consumed, it is clear that the underground reserves are not enough to cover the entire annual requirement, but act as a shock absorber to guarantee a constant flow in moments of maximum demand.
The market trap: the gap between Italy and Germany
Italy is doing its homework with filling rates higher than the European average, but energy security is not measured within national borders alone. What makes the difference is the situation of the European partners and the structure of the single market:
- Germany, Europe’s industrial engine with annual consumption close to 80 billion cubic metres, recorded stocks at around 49% of its capacity in August;
- if Germany arrives at the gates of winter with half-empty tanks, its purchase demand on the spot market will cause prices to soar on the TTF in Amsterdam;
- the increase in prices on the Dutch price list is immediately reflected in the bills of Italian families and businesses, regardless of how full the national deposits are.
The weakness of German reserves therefore represents a direct threat.
The unknown of the harsh winter and the race for Gln
Complicating the picture is the structural change in European supply. The farewell to piped gas from Russia has increased the dependence on LNG transported by ship from the United States or Qatar.
Price stability in winter will depend on weather conditions not only in Europe, but also in Asia. If there is a harsh winter in the Near East, it could trigger commercial competition on methane tankers, causing the costs of liquefied natural gas to skyrocket. The August stocks essentially serve to avoid physical blackouts, but do not block any price fluctuations caused by low temperatures in other parts of the globe or financial speculation in response to geopolitical tensions.
The illusion of the summer risks colliding with the reality of January, when what will make the difference will not only be the quantity of gas stored underground, but the cost necessary to continue importing it. It is reasonable to have some hope that the long wave of Super El Niño, which can freeze temperatures, will end before winter.
