Key facts
- European natural gas prices have soared due to a crisis in the Strait of Hormuz impacting LNG supply.
- Most of Qatar’s LNG supply remains offline, unable to easily transit the Strait of Hormuz.
- European gas storage levels are at a historical low, with EU sites at 71% capacity as of September 28.
- Germany's gas storage sites are only about 57% full, raising concerns about supply security for winter.
- QatarEnergy extended force majeure on LNG deliveries through November.
- The European Commission confirmed EU gas supply remains stable despite lower storage levels.
European natural gas prices have surged dramatically as a geopolitical crisis in the Middle East has trapped a fifth of the world’s liquefied natural gas supply behind the Strait of Hormuz. This situation is leading to higher energy bills for households and increased costs for industries, contributing to inflation.
Since early March, European gas prices have reflected a tight global gas market, with most of Qatar’s LNG supply still offline and no clear timeline for the return of normal shipping through the Strait of Hormuz. While some Qatari and UAE cargoes have transited the chokepoint recently, the volumes are insufficient to impact the global LNG balance. The difficulty in reloading LNG onto ships for transfer, compared to oil, has exacerbated the issue.
The choked LNG flows have sent September gas prices in Asia and Europe to their highest levels since the 2022-2023 energy crisis, as buyers compete for supply that bypasses the Strait of Hormuz. Consequently, European gas storage levels are at a historical low. As of September 28, EU gas storage sites were 71% full, compared to an average of 86% for this time of year over the past five years. Germany, in particular, has storage sites only about 57% full, prompting concerns about supply security if the upcoming winter is colder than usual.
QatarEnergy extended its force majeure on LNG deliveries through November, and for Italian buyer Edison, this period extends through early December. Edison stated it can source alternative gas for its customers. VGN, a major German gas importer, also assured that Germany faces no immediate supply shortage due to increased access to liquefied natural gas and a broader range of supply sources. However, the crisis has made these alternative supplies significantly more expensive.
Policymakers and authorities maintain that Europe does not face immediate gas shortages, but warn that prices will remain elevated as long as the Hormuz crisis persists. The European Commission confirmed that EU gas supply remains stable, despite lower storage levels. However, ECB economists have cautioned that the surge in wholesale natural gas prices is likely to translate into retail and electricity inflation in the Eurozone more rapidly than in the past. The European Energy Commissioner has urged EU governments to consider demand-reduction measures.