Natural gas alarm in Europe ahead of winter: Lowest storage levels in 15 years expected
Disruptions in LNG supply and low stock levels could lead to Europe entering the winter in a vulnerable state. Experts see a risk of sharp price increases.
12punto
Although energy demand in Europe has remained relatively low during the summer months, the continent is facing a new risk factor regarding natural gas stocks ahead of the winter season. Forecasts indicate that storage facilities in European Union countries may only reach a 76 percent occupancy level by the end of October.
According to projections by Wood Mackenzie, this rate could be the lowest storage level recorded at the start of winter since at least 2011. Data from Gas Infrastructure Europe also shows that storage facilities began the filling season at 28 percent capacity following a cold winter, and the current level has risen to approximately 48 percent.
The impact of tensions in the Middle East on the global liquefied natural gas (LNG) market stands out as a primary reason for the weak stocks. Disruptions in shipments through the Strait of Hormuz following conflicts along the US-Iran line are cited among the factors limiting the speed at which Europe can fill its storage facilities.
LNG SUPPLY AND PRICE RISK
Production declines in Qatar and the United Arab Emirates have also put pressure on global LNG supply. Under normal conditions, approximately one-fifth of global LNG trade is transported through the Strait of Hormuz. Therefore, any interruption in the region can affect supply and price balances for importing countries, including those in Europe.
Benchmark natural gas prices in Europe are currently around 40 euros per megawatt-hour. While this level remains well below the historic peak of 342 euros seen in 2022 following the Russia-Ukraine war, it continues to hover above pre-war averages.
Analysts state that current prices may not be attractive enough to divert global LNG cargoes to Europe. According to Argus Media analyst Natasha Fielding, the summer months are of critical importance for Europe to strengthen its storage facilities before winter.
Experts warn that temporary diplomatic relief could suppress prices in the short term, but if the squeeze in LNG supply persists, Europe could enter the winter with low stocks. In such a scenario, the onset of severe cold weather could increase the risk of a rapid rise in natural gas prices.