Key facts
- EU gas stores were 63% full in late August, the lowest in 13 years.
- Low storage levels increase the risk of winter price volatility.
- Benchmark European gas prices have climbed to three-year highs above €68 per megawatt-hour.
- Western European storage levels are particularly low, with Germany's facilities at about half-full.
- The UK faces significant exposure due to low domestic storage and reliance on imports.
Europe is facing a potential energy crisis as gas storage levels have fallen to their lowest point in 13 years, creating what experts are calling 'winter panic' among energy traders. In the final week of August, EU gas stores were only 63% full, significantly below the typical 80% average for this time of year. Analysts predict that at the current rate of replenishment, the bloc will enter the winter heating season with stocks about a fifth below the five-year average.
Several factors have contributed to the depleted reserves. A cold end to the previous winter and higher-than-usual gas power generation during summer heatwaves have increased demand. Geopolitical tensions, specifically the US-Israel war impacting oil and gas exports from the Gulf region, have disrupted supply chains. The UK is particularly vulnerable due to its high gas consumption and limited domestic storage capacity, relying heavily on imports.
Despite the low levels, physical gas shortages are not anticipated this winter. However, traders are bracing for significantly higher prices. The benchmark European gas price has already surged to three-year highs above €68 per megawatt-hour, more than double its price at the start of the year. Analysts suggest that without a return of Middle Eastern gas exports, prices could exceed €100/MWh to attract sufficient liquefied natural gas shipments.
Storage levels vary across the continent, with Western European nations like Germany, Belgium, and the Netherlands showing particularly low figures, while Italy and Poland have managed to reach over 80% capacity. The UK's reliance on imports is set to grow as domestic North Sea production declines. The UK government is exploring financial support for its gas infrastructure to ensure future supply security, even as it transitions to clean energy sources. In response to global energy market price rises, typical UK gas and electricity bills are set to increase by 4% in October.