Europe’s Gas Storage Approaching Full Capacity, Yet Uncertainty Looms

Europe’s Natural Gas Reserves Reach Record High Ahead of Winter, Yet Concerns Linger
Europe's Gas Storage Approaching Full Capacity, Yet Uncertainty Looms

Europe’s natural gas reserves are nearing full capacity, but concerns remain about whether this will be enough to meet the region’s demand during the winter months. According to Gas Infrastructure Europe, storage levels reached 90.1% capacity on August 16, which is the highest on record for this time of year and surpasses the European Union’s target for November 1. However, it is important to note that inventories were never intended to be the sole source of winter gas supplies, and several risks are looming that could impact the market.

One such risk is the potential for worker strikes in Australia, which could tighten the global market for liquefied natural gas. Europe is also still grappling with lower flows from Russia due to the ongoing conflict in Ukraine. Additionally, recent outages in Norway have led to price spikes, highlighting the fragility of the market. In short, Europe’s energy crisis is far from over.

Benchmark Dutch futures have been experiencing a third consecutive weekly gain due to ongoing supply concerns. The continent’s energy security has improved compared to this time last year, according to European energy commissioner Kadri Simson. However, recent events have shown that the gas market remains sensitive. The winter season for gas in Europe officially runs from October to March, and while storage can cover up to one-third of the EU’s gas demand during this period, weather conditions play a crucial role. Freezing temperatures could accelerate withdrawals from underground stockpiles.

Gas inventories vary by country, with Germany, the Netherlands, and Spain already surpassing the EU’s target. France, on the other hand, has storage levels at around 84% following disruptions to its energy supplies earlier this year due to nationwide strikes. Although European gas prices have decreased by about 90% compared to last year’s crisis peaks, market volatility and nervousness are likely to persist as global supplies remain tight.

Germany has already warned that shortage risks will continue until early 2027 unless more gas infrastructure is added. The market balance for next year will depend on the amount of fuel left in storage.