Europe is heading into winter with its natural gas stores at their lowest level in 13 years, triggering widespread concern among energy traders and analysts. As of the last week of August, EU gas stocks were only 63% full, significantly below the 80% average for this time of year and among the lowest levels ever recorded. This deficit is largely attributed to the disruption of Qatari LNG supplies following the U.S.-Israeli war on Iran, which has intensified global competition for available LNG cargoes and pushed prices higher.
The low storage levels are increasing the risk of heightened winter price volatility. Analysts from Morningstar and Goldman Sachs suggest that a cold winter combined with continued supply constraints could send European benchmark Dutch TTF futures prices to between 90 and 120 euros per megawatt-hour. This would mark the first time prices have topped 100 euros since Europe's energy crisis four years ago. The UK is particularly vulnerable due to its high gas consumption and will likely see energy bills reach a three-year high this winter.
To reach even conservative pre-winter storage levels, European buyers will need to outbid Asian competitors for LNG, which has been made more difficult by the disruption in the Strait of Hormuz. Energy Aspects estimates that prices could range from 60 to 80 euros per megawatt-hour, but a scenario without Qatari LNG and colder weather could push average day-ahead prices to 110 euros per megawatt-hour, leaving storage only 10% full by the end of March. The EU's relaxed target of 80% storage by December is seen as challenging to meet without government intervention, and the ongoing ban on Russian LNG imports further complicates the situation. This will ultimately result in higher energy bills for households and industries throughout this winter and potentially the next.
