Germany’s Gas Storage at 15-Year Low: Why the Market Won’t Fill Europe’s Buffer for Winter 2026

Figures released on Tuesday by INES, the association representing German gas and hydrogen storage operators, show how sharply the economics of storing gas have deteriorated. The usual business model is straightforward: buy gas when it is cheap, put it underground and sell it when winter demand pushes prices higher. This summer, that calculation stopped working.

Month-ahead futures spreads on the European Energy Exchange were around minus €0.01/MWh. Storage itself carries variable operating costs of about €3.13/MWh, before network connection fees and conversion charges. For a commercial trader, storing gas therefore implies a loss of roughly €3.14 for every megawatt-hour put into storage.

Private companies have little incentive to absorb that loss merely to make the wider energy system safer.

That is the central problem now facing Berlin: Germany has treated storage as a market activity while increasingly relying on it as critical infrastructure.

When the market has no reason to prepare for winter

The shortfall did not emerge because Germany physically lacked the ability to inject more gas. It emerged because the commercial incentives required to do so disappeared during the summer.

INES estimates that reaching even the 77% technical maximum by November 1 would require injections of 1 TWh a day. That pace was not achieved once during the three weeks preceding the association’s assessment. If the prevailing injection rate continues through the autumn, storage would reach only about 63% by November 1.

That leaves an uncomfortable gap between what the infrastructure can technically accommodate and what market participants are prepared to pay for.

INES is therefore asking the government to alter the economics. Its proposals include temporarily eliminating network entry and exit fees at storage facilities and removing the conversion surcharge, reducing costs by about €1.16/MWh. The association also wants subsidised loans through KfW to reduce the cost of financing stored gas and faster auctions of Long-Term Options designed to encourage injections.

These are not conventional market interventions designed to correct a temporary distortion. They amount to the state taking on part of the financial risk that private traders currently have no commercial reason to accept.

Berlin has so far resisted going further. The Federal Ministry for Economic Affairs said on September 2 that a physical gas shortage was not expected on the basis of current data, while acknowledging that the system is considerably tighter than last winter. The government is discussing higher storage buffers with state-owned energy companies but has avoided creating a publicly financed strategic reserve, partly because of concerns that such a mechanism would distort the market.

The dilemma is becoming harder to avoid. If gas storage is essential to national energy security, leaving its inventory entirely to a commercial calculation may no longer be sufficient.

The danger is not simply running out of gas

The most serious feature of the current situation is the interaction between the amount of gas underground and the ability to extract it quickly.

Under a normal temperature scenario, INES calculates that storage at 77% on November 1 would be sufficient for the winter, with about 38% remaining by April 1, 2027.

A winter resembling the severe conditions of 2010 produces a radically different outcome. Reserves would be exhausted by late January or early February. More importantly, the system could begin experiencing physical constraints before the caverns were completely empty.

As storage levels fall, pressure inside the underground facilities also declines. That reduces the maximum rate at which gas can be withdrawn precisely when demand can rise most sharply. On peak-demand days in January, INES estimates that the resulting supply deficit could exceed 25%.

That distinction matters. A gas system can have gas left underground and still be unable to deliver enough of it to the grid at the required rate.

For German industry, that would turn an energy-price problem into an operational one.

Residential consumers, hospitals and other social infrastructure receive priority under emergency arrangements. Energy-intensive industry therefore carries much of the immediate exposure to a severe supply constraint. Chemicals are particularly vulnerable because gas is used not only for heat but also as a feedstock. Steelmaking, including direct reduced iron production and hot-rolling operations, has limited short-term flexibility. Glass, ceramics and building-material producers depend on continuous high-temperature processes that cannot simply be interrupted without risking damage to equipment. Gas-fired combined heat and power plants also contribute to district heating.

A daily supply deficit of more than a quarter would therefore not amount to factories merely paying more for energy. It could force industrial curtailment at precisely the point when production processes are least capable of adapting.

Germany’s problem is now linked to the global gas market

Under the post-2022 European energy model, the consequences extend well beyond German storage sites.

Europe replaced much of its Russian pipeline baseload with LNG and a more market-driven supply system. That gave buyers access to a broader pool of global gas, but it also tied European energy security more closely to developments far outside the continent.

The blockade of the Strait of Hormuz during the war in Iran has exposed that dependence. Qatar’s LNG exports have been severely disrupted, while the chokepoint also affects gas flows relevant to Asian importers. Spot LNG benchmarks in Asia have risen above $18/MMBtu, after reaching $25/MMBtu in March, while oil-indexed contracts have also been pushed higher by a more than 50% rise in Brent prices.

Germany cannot compensate for inadequate storage simply by deciding to buy more LNG when winter arrives. If global supply is already constrained, additional European demand competes directly with Asian buyers for available cargoes.

That creates a feedback loop. Low German storage increases the need for winter purchases. Geopolitical disruption limits available supply. European buyers then have to compete more aggressively on the spot market, putting upward pressure on international prices.

The effects do not stop at Europe’s borders. Price-sensitive importers in emerging Asian economies can be forced to reduce industrial output, cut fertiliser production or increase fiscal subsidies when LNG prices rise sharply. The same cargo that improves Europe’s winter security can therefore make energy security more difficult elsewhere.

For LNG exporters, this is a favourable shift in bargaining power. Suppliers with flexible cargoes can extract greater value from markets competing for scarce volumes, while alternative pipeline suppliers such as Norway and Algeria gain leverage as European buyers seek to maximise every available source.

Germany, by contrast, is discovering that flexibility on the supply side does not eliminate the need for physical inventory.

The political cost of a commercial safety net

The deeper question is what European governments now consider energy infrastructure.

Storage facilities were largely treated as commercial assets because their owners and users could arbitrage seasonal price differences. But the function of those facilities changes when the consequences of inadequate inventory extend to households, power generation and industrial production.

The market cannot be expected to solve that contradiction automatically. If the forward curve does not compensate traders for the cost of storing gas, commercial behaviour will remain rational even when the collective result is strategically dangerous.

That is why proposals such as fee exemptions, subsidised KfW financing and state-backed storage incentives are becoming more than technical fixes. They point towards a different allocation of responsibility: private companies continue to operate the infrastructure, but the state increasingly absorbs the cost of ensuring that it contains enough gas when markets themselves do not reward preparedness.

Creating a permanent strategic reserve would go further, and Berlin remains wary of that option because of its potential to distort competition. Yet avoiding direct intervention does not make the underlying risk disappear. It leaves the system dependent on whether commercial conditions happen to align with the physical requirements of winter security.

This year's numbers show what happens when they do not.

The uncomfortable possibility for European policymakers is that gas storage can no longer be managed solely as an inventory problem. Once geopolitical disruptions can simultaneously squeeze LNG supply, raise global prices and remove the commercial incentive to rebuild stocks, the boundary between a private trading asset and a national security reserve becomes increasingly difficult to maintain.