Europe is facing difficulties in filling its gas reserves ahead of winter, increasing the risk that competition for supplies with Asian countries will drive prices above 100 euros (about 117 dollars) per megawatt-hour for the first time since the energy crisis four years ago, CNBC reports.
According to CNBC, on Tuesday, futures for the Dutch TTF gas hub, which is the main price benchmark for the European market, rose above 68 euros per megawatt-hour, reaching the highest level since the beginning of 2023. Prices later decreased slightly, the article notes.
“A cold winter combined with persistent supply constraints could push prices up to 90–120 euros per megawatt-hour,” said Tankret Fülöp, senior equity analyst at Morningstar, to CNBC.
The article states that Europe’s main issue now is that gas stocks are at historically low levels for this time of year.
Disruptions in navigation through the Strait of Hormuz have sharply reduced liquefied natural gas (LNG) exports from key producers in the Persian Gulf, including Qatar, just as Europe typically begins to actively inject gas into storage.
At the same time, an anomalously hot summer in Europe has led to increased demand for air conditioning and other energy-consuming household appliances. This occurs during a period when the demand for gas, which is widely used in Europe for heating and cooking, naturally decreases. According to CNBC, gas accounts for about one-sixth of total electricity production in the EU.
As a result, the level of gas storage in the EU is about 63%, according to Gas Infrastructure Europe. CNBC estimates that this is one of the lowest figures ever recorded for this time of year and about 18 percentage points lower than the average level over the past five years.
“Europe is now moving towards a situation where it will enter winter with insufficient gas supplies, which could be critical in the event of possible cold spells at the end of winter. It is particularly important that as storage depletes, the volume of gas that can be extracted daily during peak demand decreases,” wrote Matt Drinkwater, head of European gas at Energy Aspects, in an email to CNBC.
