Commodity Markets: European gas storage at 75 percent capacity, weather threatens crops

European gas storage is filling at a satisfactory pace and is currently at 75 percent capacity, significantly above the five-year average (65%). Therefore, it is expected that by the beginning of November, EU storage will be at 100 percent capacity and ready for winter, writes HUP in its weekly analyses.

The filling pace will primarily depend on LNG imports, currently under pressure due to the flow of Russian pipelines. There are two sources of risk for gas imports from Russian pipelines to Europe.

There is a high probability that Ukraine will not extend the contract with Gazprom, which expires this year, and if that happens, Europe would be left without 15 billion cubic meters of gas annually. As a potential solution, the replacement of Russian gas with Azerbaijani gas through Ukraine to Europe is mentioned. The second risk arises from the possibility that Gazprom may stop supplying gas to Europe. Gazprom has already lost a lawsuit against Uniper, and a similar situation is occurring in Austria, as it has been determined in court that payments to Gazprom for gas delivery could be blocked. Likewise, the EU is working on introducing restrictions on the import of Russian LNG.

It is expected that the price of gas will be at levels similar to the current one of around 35 euros per MWh.

Weather threatens crops

The arrival of hot and dry weather threatens summer wheat crops in the EU, especially in Southeast Europe, which will affect supplies as well as the price of wheat. The European Commission expects that wheat yields in 2024 will be higher than the five-year average, 5.71 tons/ha compared to 5.65 tons/ha.

The US Department of Agriculture expects that US exports in the 2024/2025 season will increase by 25 million bushels to 800 million bushels based on the growth of domestic supply and reduced competition from other key wheat exporters. In Russia, which is the world’s largest wheat exporter, a decline in exports is expected due to lower production of about 5 million tons in June.

The European part of Russia responsible for wheat cultivation was affected by low temperatures and drought in May, which negatively impacts wheat crops. Although US wheat exports are rising sharply, its share globally is declining, as total exports are down by as much as 20 percent compared to the 2020/2021 season. It is expected that the price of wheat will rise above USD 650 per bushel by the end of the year.