Gas Storage Optionality
Gas storage assets embed an option to shift volume across time, constrained by capacity and injection/withdrawal limits.
Storage allows injecting gas when prices are low and withdrawing when prices are high, subject to operational limits.
The value of storage depends on term-structure shape, volatility of spreads, and correlations across maturities.
Pricing and hedging gas storage requires dynamic optimisation, not just static valuation of individual forwards.
This diagram shows a gas forward curve, a simple storage policy, and the resulting inventory path. The policy injects when prices are low and withdraws when prices are high; the value is the net spread captured.
Storage optionality is the right, not the obligation, to buy in low-price periods and sell in high-price periods within capacity and rate constraints. The triggers here implement a simple heuristic strategy.
The economic value comes from the shape and volatility of the forward curve and from how much inventory and flexibility you have. Real valuation solves a dynamic optimisation problem; this picture keeps the mental model of shifting volume across time to harvest spreads.