European Gas Update – Flexibility Fix?

There is growing pressure on the European Commission to add flexibility to end-October storage targets, with expectations a 5% downwards tolerance will be applied, easing some pressure on the Sum-25 refill. However, the regime dictating the aggregate storage target is relatively complicated – only 1 1 countries are covered by the standard 90% target , whilst several others enjoy special dispensation to store lower levels. Under expected revisions, the final 1st November storage fill target could be considered around 84.9bcm, against 89.4bcm under the current regime, a delta of just 4.5bcm. As such, the volumetric relief provided by a 5% headline target revision is relatively limited. However, the signal provided by an adjustment is more important , with the Commission implying a more flexible approach to compliance and perhaps more importantly, that market conditions will be taken into account when addressing deviations from the target . Arguably, the prior behaviour of spreads (with S/W-25 trending around ~€4/MWh) implies market expectations for a rigid target with state-backed entities forced to subsi dise injections or enter the market directly should injections not proceed at a satisfactory pace , in line with 2022. Recent discussions around flexibility challenge this interpretation.