Key facts
- European gas storage is expected to be 75-78% full by November 1, 10 percentage points below the five-year average.
- Disruptions in LNG exports from the Middle East have intensified competition for spot cargoes.
- A cold winter could push European storage down to 10-15%, a critical level for the following refilling season.
- Gas tariffs for new customers in Germany have risen 55% this year.
- Britain's price cap on household energy bills may increase by 16% in January.
- The EU's full ban on Russian LNG imports from January 2027 will further tighten supply.
European households and industries are likely to face elevated natural gas prices for at least another year, even with a mild winter or resolution of the conflict in the Middle East, as the continent struggles to refill depleted gas storage reserves. European benchmark gas prices have surged over 150% this year, driven by shipping disruptions in the Strait of Hormuz that have impacted LNG exports from Qatar and the UAE.
Analysts anticipate European gas storage will be 75-78% full by November 1, the end of the restocking season. This level is approximately 10 percentage points below the five-year average and starts from a lower base. LSEG analyst Yuriy Onyshkiv warned that reserves could fall to around 20% by April, potentially increasing pressure to restock in 2027, especially if the Strait of Hormuz remains closed.
Moutaz Altaghlibi, senior energy economist at ABN Amro, stated that while an outright supply shortage is not imminent, the region lacks a sufficient operational buffer. Typically, storage provides 25-30% of winter gas consumption in the EU, making the bloc reliant on pipeline supplies and LNG, particularly from Norway and the US. Any supply disruption or continued competition from Asia for LNG cargoes could lead to further price spikes.
ABN Amro forecasts that a cold winter could deplete European storage to 10-15%, a level Altaghlibi described as "very critical and challenging" for the subsequent refilling season. This situation echoes the 2022 energy crisis, which saw European benchmark prices exceed €350 per megawatt-hour (MWh) after Russia cut pipeline gas supplies. While most analysts do not foresee a return to such extremes, a spike above €100/MWh is considered feasible.
Consumers are expected to feel the impact of current wholesale price increases in 2027 as retail contracts are renewed. In Germany, gas tariffs for new customers have already increased by 55% this year, and existing customers are likely to face 10-20% hikes. Consultancy Cornwall Insight forecasts that Britain's household energy bill price cap could rise by another 16% in January, with volatility expected to persist.
Industry and businesses are already struggling with higher gas prices compared to the US. Some analysts suggest the EU needs a more proactive response, with the energy chief urging member states to cut gas demand. The bloc had previously implemented measures to speed up renewables deployment and reduce fossil fuel dependency following the 2022 Russian gas supply collapse.
Andreas Schroeder, head of gas and LNG analytics at ICIS, expects the conflict between the US and Iran to be resolved over winter, but believes markets are underestimating the demand for storage injections in Europe. The EU's planned ban on Russian LNG imports from January 2027 is also expected to tighten supply. Energy strategist Florence Schmit at Rabobank noted that markets may be underestimating global LNG supply growth elsewhere and has raised near-term price forecasts, though maintaining a full-year 2027 forecast around €45/MWh, which is still higher than previous projections.
BNP Paribas analyst Jason Ying suggested that an unusually strong El Nino could lead to stronger winds and above-normal winter temperatures in Europe, boosting wind power generation and potentially curbing gas demand and prices. However, he added that due to LNG disruptions, market normalization to pre-conflict levels is not expected until 2028.