Germany Weighs Market Incentives to Boost Record Low Gas Storage Level
Germany is considering enlarging an existing market mechanism, the autumn tender for Long Term Options (LTOs), to encourage traders to refill gas storage ahead of winter, a government source told Reuters. Gas sites in Germany were only about 56% full in mid-September, a historically low level that has prompted warnings about possible shortages if this winter is colder than recent years.
Why It Matters
With storage at the weakest level in at least 15 years and market prices in backwardation, relying on market incentives to raise inventories carries heightened risk of supply shortfalls; the outcome will influence whether the government sticks to market tools or moves back toward direct intervention as in 2022.
Key Facts
- current-storage-fill: 56% full as of mid-September (Gas Infrastructure Europe)
- storage-ranking: Germany has the world’s fourth-largest natural gas storage capacity
- historical-context: Storage level is the lowest in at least a decade and a half
- market-dynamics: Soaring natural gas prices amid the Middle East crisis have deepened backwardation, discouraging holding supply for later deliveries
- government-action: Considering expanding the autumn tender for Long Term Options (LTOs) by an as-yet-undetermined volume (government source to Reuters)
The German government is weighing an expansion of its autumn tender for Long Term Options (LTOs) to nudge traders into boosting gas inventories before winter, a government source told Reuters. Officials intend to scale up this market instrument rather than revert to the broad direct state gas purchases used in 2022, and any increase in the tender volume has not yet been set.
Storage levels in Germany are unusually low heading into the refill season. Data from Gas Infrastructure Europe showed national storage was about 56% full in mid-September, the weakest reading in at least around 15 years. Market participants say higher prompt prices — linked to the Middle East crisis — have created a backwardation structure that makes it less attractive to keep gas in storage for future delivery.
Industry voices have warned the low fill rate raises the prospect of shortages if winter temperatures fall below recent averages. The German gas storage association INES said refilling has lagged the pace needed, and its managing director, Sebastian Heinermann, noted that while reaching roughly 77% storage would still be technically feasible, simply reserving capacity won’t ensure facilities are filled unless doing so is economically viable for market players.
Although Berlin prefers to use market incentives, it has reached agreement with state-held energy companies Uniper and SEFE to add more gas to their storage sites. The government source indicated the LTO tender will be enlarged, but left open how much additional volume will be offered; officials appear focused on making commercial terms attractive enough so traders actually carry out the replenishment.
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