Europe wary as gas stocks languish at lows while winter looms

Europe's gas stocks have hit record lows as winter approaches, raising concerns about potential supply shortages and high prices. Since Russia's invasion of Ukraine four years ago, Europe has increased its import capacity but has slashed its Russian gas supplies in response. However, Iran's closure of the Strait of Hormuz is keeping liquefied natural gas (LNG) stocks unusually low, with winter just months away.

This has led to surging prices for European buyers, with the Dutch TTF contract for September delivery trading around €55-€58 per megawatt-hour, compared to just €30 before the Middle East war and as low as €15-€20 before the war in Ukraine. Analysis from Gas Infrastructure Europe shows that European stockpiles are at just 58%, the lowest since 2021.

The EU has ramped up its import capacity since the Ukraine war, but it still relies heavily on Russian gas, which now accounts for around 12% of the bloc's gas imports. Europe has reduced its gas demand by 17% compared to pre-crisis levels, but analysts warn that supply risks remain elevated. They cite potential disruptions to LNG availability from the Middle East, breakdowns in gas infrastructure, and severe cold in the US, which could divert supplies to domestic buyers.

If storage levels remain low and the winter is particularly harsh, European regulators may have to consider conservation measures, as occurred in 2022.