European benchmark TTF natural gas futures rose by 4% during trading on Wednesday before retreating, closing around €81 per megawatt hour; on the same day, Europe’s overall gas storage facilities were only about 68% full, with Germany’s storage level dropping to about 56%, significantly lagging behind the five-year average.

The storage gap in Germany is particularly pronounced—on September 1, the gas storage rate in Germany fell to about 53%, the lowest level for the same period in 15 years, down nearly 18 percentage points from about 71% a year earlier, corresponding to an actual storage volume of about 136 billion kilowatt hours. Industry organization INES estimates that to ensure winter supply under normal climatic conditions, the storage rate must reach at least 77% by November 1; even so, in the event of an extreme cold wave, the daily supply gap could still exceed 25% of daily demand.

The futures curve simultaneously reflects market concerns about winter gas shortages—the premium of the summer 2027 contract over the subsequent winter contract has expanded to a historic record level, indicating that traders are betting that the storage level at the end of the 2026-27 heating season will drop to a historical low, necessitating higher summer purchases to secure replenishment resources in advance. A similar "backwardation" structure appeared in early 2026, when the premium for the 2027-28 storage year contract once reached around €2.5 per megawatt hour.

The core shock on the supply side comes from the situation in Iran and the Strait of Hormuz—since early March this year, Iranian military actions have caused about 17% of the capacity of Qatar's Ras Laffan LNG export facility to remain offline, with an annual capacity of 77 million tons, accounting for about one-fifth of global LNG production, and repairs are expected to take 3 to 5 years. The supply gap has forced European buyers to compete for alternative sources in the international spot market, further driving up landed prices.

German Chancellor Merz has publicly acknowledged that the government needs to intervene again in energy costs, with the fifth round of energy subsidy plans expected to be announced after the local elections on September 20; the EU has lowered the official gas storage target from the original 90% to 80% to adapt to current market conditions. On a macro level, energy prices in the Eurozone rose by 14.3% year-on-year in August, with the overall inflation rate reported at 3.3%, and the yield on Germany's 10-year government bonds briefly rose to 3.38%, the highest since 2011.

This round of purchasing is a typical "expectation-driven" replenishment rush: gas storage operators have lagged behind the five-year average due to high spot prices driven by geopolitical conflicts during the spring and summer, making it economically unfeasible to replenish at market prices; entering September, traders began to concentrate on buying forward contracts to hedge against winter heating season costs, pushing the premium of the summer 2027 contract relative to the winter contract to record levels, with funds clearly flowing from spot/near-term contracts to longer-term hedging positions. Beneficiaries are traders who control spot LNG sources and can sell spot at high prices, while those under pressure are industrial gas-consuming countries like Germany, where storage rates are significantly below average, facing higher gas costs in energy-intensive industries such as chemicals and steel, compounded by rising German bond yields and tightening financing conditions.

Historical comparisons of spot and forward price differentials show that similar "backwardation" structures mainly appeared during the 2021-2022 energy crisis, when the premium of summer contracts over winter contracts also reached record levels. The overall progress of EU gas storage (about 65.4% as of September 1) is already the lowest for the same period since records began in 2011, with Germany's gas storage bookings at only about 64% of its total capacity of 251 terawatt hours, significantly down from nearly 83% actual levels on November 1 last year.

Source: Public Information