The gas crisis in Europe is intensifying as low storage levels, geopolitical tensions and competition for liquefied natural gas (LNG) increase pressure on energy markets.
Although analysts expect European natural gas prices to ease over the coming quarters, current market conditions suggest a period of continued uncertainty for Europe’s energy sector.
According to data from Gas Infrastructure Europe, EU gas storage facilities were recently filled to 57.43% of capacity, the lowest level recorded for August since records began in 2008.
Storage recovery slower than expected
Energy market officials told Greek newspaper Naftemporiki that gas storage replenishment in Europe is progressing more slowly than forecast.
They warned that the current situation resembles 2021, when low storage levels contributed to a sharp increase in gas prices towards the end of the year.
This raises concerns over higher heating and electricity costs during the next winter period.
European benchmark gas prices recently increased by more than 7%, reaching €61.80 per megawatt hour (MWh), before falling slightly following speculation of renewed US-Iran engagement.
However, mixed signals from both sides reduced optimism over a possible breakthrough.
Iran war adds pressure to markets
The conflict in the Gulf has contributed to renewed tensions in gas markets.
Europe’s benchmark gas price started the year at around €25 per MWh, but the Iran conflict pushed prices higher again after the closure of the Strait of Hormuz, causing prices to rise by more than 80%.
Between 2000 and 2021, European gas prices averaged around €19 per MWh. Those levels disappeared after the energy crisis triggered by Russia’s invasion of Ukraine and have not returned.
Since then, European gas has cost around three times more on average than during the previous two decades.
LNG competition shifts towards Asia
Analysts warn that Europe is also facing stronger competition for LNG supplies, particularly from Asian markets.
The Gulf conflict has disrupted around one-fifth of global gas supplies, increasing pressure on European buyers.
LNG, mainly imported from the United States, has become a highly sought-after resource, with countries worldwide competing for available shipments.
According to Bloomberg estimates, LNG cargoes scheduled to leave the US in August could find more profitable markets in Asia than Europe based on price benchmarks from 31 July.
Although Europe continues to pay premiums for LNG deliveries from September, analysts warn that its access window could narrow if Qatar cannot increase exports by the end of August.
Experts warn challenges remain
Anne-Sophie Corbeau, a researcher at Columbia University’s Center on Global Energy Policy, said the key question is whether market intervention will be needed.
She warned that storage levels remain particularly low in countries including Belgium, the Netherlands, Latvia, Bulgaria, Germany and Slovakia.
Analyst Arne Lohmann Rasmussen of Global Risk Management said problems affecting nuclear and hydroelectric power generation in Europe, caused by low water levels in rivers, could increase demand for gas-fired electricity production.
Even reopening Hormuz may not solve issue
Analysts say that even a possible reopening of the Strait of Hormuz would not fully resolve Europe’s energy challenges.
If the strait reopened by mid-September, European gas storage could reach around 65% capacity by 1 November, according to market estimates.
That compares with nearly 80% storage levels recorded in November 2021, considered one of the most difficult years for European gas supplies.
While analysts expect gas prices to moderate in the coming years, potentially reaching around €32 per MWh by the end of 2027, current market pressures indicate that Europe may be facing prolonged energy uncertainty.
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