Europe Faces Winter Gas Crunch
Europe is more than 100 terawatt-hours short of meeting its minimum target of 75% gas storage capacity, a shortfall worth more than €7bn ($8.1bn). The required pace of replenishment at this time of year was last seen during the 2022 energy crisis.
The war in Iran has driven up prices and restricted supplies from the Persian Gulf, while shipments of liquefied natural gas (LNG) through the Strait of Hormuz remain virtually halted.
Governments and energy companies had postponed purchases in the hope that prices would fall, but that has not happened. Bloomberg warns that winter contracts could therefore exceed €100 ($116) per megawatt-hour.
According to Oxford Economics, higher costs could push inflation above 6% and lead to a difficult winter for households and industry alike. Cold weather, stronger Chinese demand, outages in Norway or a US hurricane could exacerbate the situation.
Preparedness varies significantly across Europe. Italy has filled its storage capacity to about 83%, while German reserves, the largest in Europe, are only slightly above half full. The Netherlands and Belgium are also reporting low levels.
A ban on imports of Russian LNG, which accounts for about 5% of European Union consumption, will also take effect in January 2027.
Even a rapid reopening of the Strait of Hormuz would not bring immediate relief, as Qatar would need about 12 weeks to fully resume production.
Europe is more than 100 terawatt-hours short —worth more than seven billion euros—of meeting the minimum target of 75 percent storage capacity. The required rate of replenishment at this time of year was last seen during the energy crisis of 2022.
The war in Iran has driven up prices and restricted supplies from the Persian Gulf. The transport of liquefied natural gas through the Strait of Hormuz remains virtually halted.
Governments and energy companies had postponed purchases in the hope that prices would fall, but that did not happen. Winter contracts could therefore exceed 100 euros per megawatt-hour, warns Bloomberg.
According to Oxford Economics, higher costs could push inflation above six percent and lead to a difficult winter for households and industry alike. The situation could be exacerbated by cold weather, stronger Chinese demand, outages in Norway, or a U.S. hurricane.
Preparedness varies significantly from country to country. Italy has filled its storage capacity to about 83 percent, while German reserves—the largest in Europe—are only slightly above half. The Netherlands and Belgium are also reporting low levels.
Furthermore, a ban on imports of Russian liquefied natural gas—which accounts for about 5 percent of the European Union’s consumption—will take effect in January 2027.
Even a rapid reopening of the Strait of Hormuz would not bring immediate relief, as Qatar needs about 12 weeks to fully resume production.
(Bloomberg, bak)