European natural gas inventory is in urgent need: extraction reaches a five-year high, prices surge 30% in a single month.

Due to prolonged extremely cold weather and multiple supply disruptions, the daily net withdrawal from natural gas storage facilities across Europe reached approximately 7.79 terawatt-hours in January, about 730 million cubic meters, marking the highest level in five years since 2021. It is worth noting that the import volume of liquefied natural gas is still less than half of this daily net withdrawal amount. Currently, the overall storage levels in Europe have rapidly declined to about 50.36%, significantly below the average level for the same period over the past five years. Some countries such as Croatia and the Netherlands have raised high alerts in the market due to the urgent state of their inventories. As a result, the European Benchmark Gas Price (TTF) has seen a cumulative increase of over 30% this month. The core reason for the unexpected depletion of stocks in this round lies in the dual squeeze from both the demand and supply sides. This includes an increase in heating demand driven by the extreme cold snap that swept across continental Europe in January 2026, as well as the expiration of the Russia-Ukraine natural gas transit agreement in 2025 which led to a further reduction in Europe's pipeline gas import share. At the same time, the recent lower efficiency of wind power generation in Europe has led to a simultaneous increase in gas-fired power generation demand, with utility companies tending to prioritize the extraction of previously stored low-cost gas over purchasing expensive liquefied natural gas. The combination of multiple factors has resulted in a surge in the rate of stock utilization. Furthermore, the unusually cold weather in the previous period not only reversed market pessimism but also led to a sharp turnaround in bearish positions. Currently, natural gas stocks in Europe are less than half of the normal level, significantly below the average for the same period in previous years. Wood Mackenzie Limited predicts that if the current trend continues, stocks will decrease to only 20% of the normal level by the end of winter. More significantly, the unfavorable price spread between summer and winter contracts continues to widen, weakening the economic efficiency of the traditional arbitrage model of buying low in summer and selling high in winter a key mechanism contributing to the current stock shortage. "Europe's supply-demand balance is tighter than in previous winters," said David Lewis, senior research analyst at the company. "Therefore, storage facilities have had to make up for the shortfall in pipeline supply and increased demand." While Europe lost most of its pipeline gas supply from Russia after the escalation of the Russia-Ukraine conflict in 2022, the remaining portion of supply was cut off again at the beginning of 2025 as the transit agreement with Kiev expired. Therefore, before this winter arrived, the region had to rely more on liquefied natural gas. Patricio Alvarez, senior analyst at Bloomberg, pointed out that the extraction of natural gas from storage facilities is not only driven by cold weather, but also reflects the economic balancing logic between stored natural gas and flexible import of liquefied natural gas (LNG). Specifically, at present, when spot prices are high as is currently the case in the market the attractiveness of LNG imports has significantly decreased. This is because LNG is priced based on high market prices and incurs additional transportation and regasification costs. In comparison, natural gas in storage facilities is often purchased at low prices, can be quickly extracted, and has lower marginal costs, making it more economically advantageous during periods of high gas prices. Alvarez emphasized that despite these factors, the amount of natural gas extracted in January reached a historical peak. This phenomenon has further aroused attention in the market regarding the policy window for storage facilities before the next storage season officially starts (usually in April), the measures that countries may enact in response to the current situation will be a key variable for assessing energy security in the market. Lewis, an analyst at Wood Mackenzie, pointed out that the new LNG supply expected to come online in the spring is projected to help Europe achieve the fastest filling of storage facilities in five years. However, other analysts warn that without supportive government policies, this expectation may be difficult to realize. David Tasinato, an analyst at the Italian company Axpo, added: "The possibility of government intervention still exists for example, subsidy policies linked to storage targets can effectively support gas injection operations before the storage season starts (usually in April)." However, he also emphasized that any decisions in this regard may be announced at the last minute, "mainly to prevent potential speculative activities from disrupting the market." Overall, market analysis generally predicts that if the current rate of de-stocking remains unchanged, by the end of March 2026 when the heating season ends, the balance of natural gas stocks in Europe may drop to as low as 20%, far below the seasonal safety range of normal years. This means that in the upcoming summer of 2026, Europe will face an extremely challenging restocking task, needing to invest more capital to purchase liquefied natural gas on a larger scale to ensure that the storage goal of 90% is reached again by the end of the year. This restocking pressure is expected to keep European natural gas prices at high levels with wide fluctuations throughout 2026, prompting a reassessment of the EU's long-term energy security reserve mechanism.