European Union gas storage levels have dropped further to mark their lowest mid-August level in five years, with analysts anticipating the bloc would not meet its winter target as Europe competes with Asian buyers for scarce supplies of the liquifed natural gas (LNG) due to the Middle East tensions.
EU gas storage facilities were 60.8% full on Aug. 17, down from 73.6% a year earlier, according to Gas Infrastructure Europe (GIE) data.
Storage levels stood at 75.6% in mid-August 2022, 90% in 2023 and 89% in 2024, the data showed.
Analysts expect the bloc to fall well short of its 90% target by Nov. 1.
Ole Dramhal, senior analyst at Rystad Energy Gas and LNG Markets, expects EU storage to reach about 75% by Nov. 1 in his base case, while Ronald Pinto, principal insight analyst at Kpler LNG and Natural Gas, expects levels to reach about 77%.
The lower storage levels come amid expectations that LNG supply from the Middle East will remain capped until the end of the year, with exports normalizing around April 2027.
"To reach 80%, Europe would need around 5.2 billion cubic meters (bcm) of additional gas compared with our 75% base case," Dramhal said, adding that this would be equivalent to around 50 LNG cargoes on 174,000-cubic-metre vessels.
Reaching 90% would require about 15.6 bcm of additional gas, or roughly 150 extra LNG cargoes, assuming demand remains broadly in line with the base case, he added.
Pinto said a total of 24 million metric tons of LNG is expected to be imported into the EU between August and October.
"To reach 80% or 90%, which we believe is extremely unlikely under our base case, LNG imports will need to be around 26 million tons and 33 million tons, respectively," Pinto said.
Pipeline supplies offer limited additional flexibility, Pinto said, as the forecast already assumes lighter year-on-year maintenance in Norway and muted exports to Ukraine.
The EU had previously required member states to fill gas storage facilities to 90% by Nov. 1 following the energy crisis triggered by Russia's invasion of Ukraine.
The bloc last year introduced greater flexibility, allowing the target to be met between Oct. 1 and Dec. 1 and permitting lower storage levels, at 80%, under certain market conditions.
The slower pace of injections has increased Europe's dependence on LNG as it competes with Asian buyers for flexible cargoes.
Dramhal said Japan and South Korea continued to compete for LNG, while India, Bangladesh and Taiwan had also remained active in the market, reducing the amount of flexible supply available to Europe.
"This is affecting LNG-to-European-hub spreads and contributing to a more backwardated forward curve," he said, reducing the economic incentive to inject gas into storage.
Pinto said the disruption to LNG supply had been the main factor affecting European gas markets, both directly and indirectly.
Italy, Poland and Belgium, which have contracted Qatari LNG, have been directly affected by the disruption, as they have been unable to import any Qatari LNG volumes since April 2 – the date on which Italy received its last vessel loaded with Qatari LNG.
Meanwhile, Asian buyers have sought to replace lost Middle Eastern supplies with uncommitted Atlantic Basin LNG, pricing European buyers out of some cargoes, he said.
The Strait of Hormuz remains an important route for global LNG trade, particularly for Qatari exports.
Disruptions to shipping through the strait have affected Qatari LNG flows and intensified competition for spot LNG cargoes, with Europe and Asia competing for available supply.
Pinto said European buyers had initially adopted a wait-and-see approach, expecting the conflict to end and LNG supply to recover, which limited the extent to which TTF prices, the benchmark price for natural gas in Europe, priced in the risk of winter shortages.
As a result, winter prices remained below summer prices, providing little incentive to build inventories ahead of winter and contributing to slower storage injections, he said.
He added that mild winter forecasts linked to El Nino had also reduced concerns over low storage levels, although changing weather patterns or prolonged supply disruptions could alter the outlook.
"Higher prices in recent weeks likely reflect a gradual reckoning among European market players of a prolonged supply disruption," Pinto said.
The tighter supply outlook has also supported European gas prices. The September Dutch TTF contract was trading at 62.11 euros ($71.90) per megawatt-hour (MWh) on Aug. 17, up 103% from 30.54 euros a year earlier.
Europe's benchmark gas price has therefore more than doubled year-over-year, highlighting the pressure facing the market as the region enters the final months of the storage season.
Pinto expects European gas prices to remain elevated through the end of the year to attract uncommitted LNG from the Atlantic Basin, assuming Middle Eastern LNG supplies remain capped.
He said EU storage levels would ultimately reflect a combination of demand destruction caused by high prices, higher year-on-year pipeline imports and improving LNG supply.
