Historically low levels of natural gas in storage sites for this time of year could leave the European Union with a gas shortfall in the winter and could force the bloc to cut demand by 7%, the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA) said in a report on Friday.
European natural gas prices have soared dramatically since the war in Iran trapped a fifth of the world’s liquefied natural gas supply behind the Strait of Hormuz. Since early March, European gas prices have reflected the tight global gas market, with most of Qatar’s LNG supply still offline and no clarity on when some semblance of normal shipping of LNG cargoes would return at the Strait of Hormuz.
The high prices are creating a headache for governments amid soaring energy bills for households and spiking energy costs for industry.
As winter approaches, storage levels are at their lowest since records began in 2011. The EU is heading into winter with gas storage at about 73% full as of early October, the IEEFA analysis found.
Cold snaps this coming winter could further complicate the EU’s gas supply, which will reflect as of January 1, 2027 the bloc’s full ban on imports of Russian LNG.
The shortfall could require the EU to cut winter gas demand by 7%, or 14 billion cubic meters (bcm), compared with last winter, according to IEEFA’s report.
The current strain on storage levels shows that Europe’s gas dependency is a growing liability, according to Ana Maria Jaller-Makarewicz, Lead Energy Analyst for IEEFA’s Europe team.
In similar findings in a separate report, ENTSOG, the European Network Transmission System Operators for Gas, said on Thursday that in a case of a colder-than-usual winter but optimal LNG supply, the EU would still have to curb 7% of demand.
Policymakers and authorities say that Europe doesn’t face immediate gas shortages, but warn that until the Hormuz crisis lasts, prices are set to remain much higher than in the past two years.
By Tsvetana Paraskova for Oilprice.com
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