The storage paradox strikes back: while gas storage is high on the agenda, and everyone is realizing its value ahead the heating season, its market “valuation” turned into deep negative in recent weeks.
seasonal price spreads on TTF, the difference between winter and summer contracts, dropped to below €1/MWh for the front Gas Year.
the reason behind is the infamous gas storage paradox: the market expects that we will close the heating season with low stock levels, which supports summer22 contacts, and in turn squeezes the price spread with the winter ahead contracts.
in essence the gas storage paradox has two negative effects: (1) it disincentivizes summer injections and leads to low storage fill rates; (2) deteriorates storage economics, leading to storage site closures.
for more details on the gas storage paradox and why we need an EU level solutions for storage have look on the article in the comments!
what is your view? do we need to reconsider market design for gas storage? do we need EU-level solutions? can we harmonize national storage regulations?
Source: Greg Molnar