The European Union is experiencing the fastest depletion of its gas storage reserves since the energy crisis began three years ago, primarily driven by colder weather and diminished maritime imports. The Financial Times reports this significant drop has led to gas reserves decreasing by approximately 19% since the end of September, marking the end of the gas injection season, until mid-December. Comparatively, during this period over the past two years, reductions were limited to single digits thanks to warmer weather and curtailed demand driven by high prices.
According to Natasha Fielding, Head of European gas pricing at Argus Media, "This winter, Europe has had to rely much more on its underground storage than in the past two years to offset reduced imports of liquefied natural gas (LNG) and meet increased demand."
With heightened competition for LNG imports from Asian countries, which are attracted by lower prices compared to recent years, the bloc has found itself increasingly dependent on stored reserves. The last time such rapid depletion occurred was back around mid-December 2021, as Russia began cutting pipeline gas supplies prior to its full-scale invasion of Ukraine.
Currently, EU storage levels hover around 75%, slightly above the ten-year average prior to the bloc's efforts to reduce reliance on Russian imports. For comparison, storage levels approached 90% at the same time last year.
Despite the turmoil, gas prices have significantly dropped, resting approximately 90% lower than the summer 2022 peak of over €300 per megawatt-hour. Nevertheless, analysts warn this depletion could lead to challenges for replenishing reserves next year, with traders indicating they expect prices for gas delivery next summer to rise above those for the upcoming winter. This signifies mounting costs for refilling storage, as mandated by the European Commission's replenishment target requiring EU countries to fill storage to 90% capacity by early November.
Simultaneously, major suppliers such as the U.S. and Qatar are adding to the complexity of European gas dependencies. U.S. President-elect Donald Trump cautioned the EU to procure large volumes of American oil and gas, threatening tariffs if they fail to comply. Meanwhile, Qatar has hinted at potentially halting LNG supplies if strict new legislation penalizes companies for failing to meet certain standards.
Anne-Sophie Corbeau, a research scholar at Columbia University's Center on Global Energy Policy, has noted industrial gas demand across nine northwestern European countries is also on the rise, recovering from lows experienced earlier this year with a year-on-year increase of 6% from January to November.
There's also significant disparity on how quickly different countries are depleting their reserves. For example, the Netherlands has decreased its stored gas volume by 33% since winter’s onset, whereas France has seen reductions of 28%. Simultaneously, Russian gas flowing through Ukraine is expected to halt by the end of next year as the transit agreement expires, which currently accounts for approximately 5% of the EU's gas imports.
Andreas Guth, Secretary General of the industry organization Eurogas, expressed, "There don't seem to be significant concerns" about the potential cessation of Russian gas supplies via Ukraine.
With meteorologists predicting Europe is heading for its coldest winter since the onset of Russia's invasion, stakeholders fear this may lead to higher energy prices as reserves dwindle rapidly. Increased energy prices likely pose challenges for both consumers and industry, emphasizing the urgent need for strategic energy planning as Europe navigates its shifting gas supply dynamics.
