European gas market analysts are intensively monitoring Ukrainian energy storage amidst ongoing attacks on infrastructure by Russia and less attractive financial spreads compared to the previous year.

Since the outset of March, the onslaught on Ukraine's energy facilities has intensified, with various attacks orchestrated by Russian forces. "It is just too sudden and unpredictable for me," stated a trader from the Netherlands, highlighting the volatile nature of the crisis in Ukraine.

Russian President Vladimir Putin, in a dialogue on April 11 with the Belarusian President, acknowledged the military actions. "We sadly watched a series of attacks on our energy infrastructure and were forced to respond," Putin admitted.

In addition to storage units, Ukraine's gas production capabilities have also suffered from frequent shelling and power disruptions. Despite these challenges, Naftogaz's upstream division, UkrGazVydobuvannya, reported a commendable 12% y/y increase in production in the first quarter of 2024.

Analysts at S&P Global Commodity Insights recently adjusted their forecasts, now deeming it probable that Russian gas transits through Ukraine might cease by 2025.

To mitigate the impact of these disruptions, Ukraine has adopted a collective approach to gas storage management. "The regime bundles all Ukrainian storage facilities as one, meaning if one facility is hit, participants can continue to withdraw gas from other facilities," explained Agneta Kutselim, head of commercial at UkrTransGaz. The company has also incentivised the reimportation of gas into the EU by waiving customs duties for three years.

For comparison, Germany boasts the EU's largest underground storage capacity, with its facilities holding approximately 25bn cubic metres of working gas, according to Gas Infrastructure Europe.

The market conditions have also seen shifts in pricing dynamics. On May 11, Platts, a division of S&P Global Commodity Insights, valued the Winter 2024 premium at Europe's key Dutch TTF hub at €5.32 per MWh, with the spread maintaining a similar average since the start of the summer season. This is a significant decrease from the previous year's premium, which had peaked at €20.6 per MWh by late May 2023.

These developments underscore the ongoing volatility and complexity in the European gas markets, particularly influenced by geopolitical tensions and infrastructural resilience in Ukraine.