Europe wary as gas stocks languish at lows while winter looms

Europe faces growing concerns over its dwindling natural gas reserves as the winter season approaches, amid ongoing geopolitical tensions. Since Russia's invasion of Ukraine in 2022, the continent has ramped up its imports of liquefied natural gas (LNG), cutting its reliance on Russian supplies. However, rising prices due to Iran closing the Strait of Hormuz have kept LNG stocks unusually low.

Winter is just months away, raising the specter of supply difficulties and prices remaining high, as colder Continental weather drives up demand. European gas storage levels are significantly below pre-crisis norms, at just 58%, the lowest since 2021, according to industry data. This is due to the EU ending last winter with only 28% underground gas storage, much lower than previous years.

The Middle East war has curtailed EU imports, as sanctions on Iran halted gas shipments from Qatar, a key supplier. With Russia set to ban future European gas imports by 2027, European buyers had hoped prices would ease by summer, but they have not. Analysts warn of heightened supply risks and price volatility, as Asian countries that usually buy from Gulf suppliers could turn to US or other sources, driving up prices for European buyers.