‘Winter panic’: EU gas stores at their lowest level in 13 years

Europe is facing significant concerns as it heads into the winter months with natural gas reserves at their lowest level in 13 years, sparking worries among energy traders and analysts. The European Union's gas storage levels stood at just 63% full in late August, well below the five-year average of 80% for this time of year, according to the latest data from Gas Infrastructure Europe. This shortfall has intensified fears of heightened price volatility and potential supply challenges during the colder months.

Analysts warn that the EU is on track to enter the winter heating season with gas stocks about a fifth below the five-year average, marking the lowest levels since 2013. Greg Molnar, a gas analyst and professor, emphasized that low storage levels increase the risk of price spikes, particularly if cold weather or reduced wind generation forces greater reliance on gas for heating and electricity. The situation is compounded by the ongoing disruption to oil and gas exports from the Gulf region following the US-Israel conflict with Iran, which has severely impacted global energy supplies.

The United Kingdom may be especially vulnerable to these market fluctuations. As one of Europe’s largest gas consumers, the UK has among the lowest domestic gas storage capacities on the continent. Chris O’Shea, chief executive of Centrica, which owns British Gas, confirmed this week that the UK has “almost no gas in storage” for the coming winter. Typically, the UK depends on pipeline imports from Europe and liquefied natural gas (LNG) shipments from the United States and the Middle East to meet demand.

Europe’s gas market prices have remained relatively stable this summer, with traders hoping for a resolution to the Strait of Hormuz blockade that could ease supply constraints. However, Bjarne Schieldrop, chief analyst for commodities at SEB, noted that “no one expects it to happen any time soon,” adding that the market has entered a state of “winter panic” in recent weeks. Benchmark gas prices have already surged to three-year highs above €68 per megawatt-hour (MWh), more than double the price at the start of 2024.

Higher prices are expected to persist as European buyers compete with Asian importers for limited LNG cargoes once temperatures drop. Analysts at Goldman Sachs estimate that without a return of Middle East gas exports, Europe’s benchmark price could need to exceed €100/MWh to secure sufficient supplies for winter. Western Europe, in particular, faces acute supply concerns, with storage levels in Germany, Belgium, and the Netherlands well below those in countries like Italy and Poland, which have managed to fill their reserves to over 80% capacity.

The UK’s reliance on imported gas is likely to grow as domestic production from the North Sea declines and Norwegian gas output begins to fall after 2030. To mitigate risks, the UK government is considering direct financial support for domestic gas infrastructure, including storage facilities and pipelines, to ensure long-term viability. Ofgem, the UK energy regulator, recently announced that typical gas and electricity bills will rise by 4% from October, following a 13% increase in July, reflecting the ongoing impact of global energy market volatility linked to the Iran conflict.

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