Increased demand due to cold weather and reduced liquefied natural gas (LNG) imports by sea are causing the European Union (EU) to deplete its gas storage reserves at the fastest rate since the energy crisis three years ago.
The Financial Times (FT) cites data from Gas Infrastructure Europe, indicating that gas volumes in the bloc’s storage fields have dropped by approximately 19% between late September and mid-December, the traditional end of the filling season in gas markets. In contrast, the previous two years saw single-digit declines during the same period, supported by milder-than-average winters and reduced industrial demand due to elevated prices.
“Europe has had to rely much more heavily on underground storage this winter than in the past two years to compensate for the decline in liquefied natural gas imports and meet stronger demand,” explained Natasha Fielding, head of European gas pricing at Argus Media.
Europe’s reliance on stored gas reserves is further intensified by increased competition for LNG imports from Asia, where lower prices have attracted buyers. This shift has reduced European imports and necessitated greater use of existing reserves.
Currently, the EU’s gas storage levels stand at 75%, which is slightly above the 10-year average before efforts to reduce dependence on Russian imports. A year ago, storage levels were close to 90% in mid-December.
European gas prices have plummeted by approximately 90% compared to the peak prices of over €300 per megawatt hour during the summer of 2022 energy crisis. However, the rapid depletion of storage this winter raises concerns about the challenges and costs of refilling reserves for the next heating season.
Market dynamics reflect these challenges: traders are already pricing gas for summer delivery at higher rates than for the following winter, signaling rising replenishment costs.
The European Commission mandates that EU countries fill their gas storage facilities to 90% capacity by early November. However, some member states have lower targets, further complicating regional supply strategies.
A substantial portion of Europe’s gas now comes as LNG, which is increasingly influenced by geopolitics. The United States, the EU’s largest LNG supplier, has demanded long-term commitments to purchase U.S. gas or face potential tariffs. Qatar, the third-largest supplier, has threatened to halt shipments if the EU enforces new regulations penalizing companies that fail to meet environmental, human rights, and labor standards.
Additionally, colder weather conditions and the Dunkelflaute—periods when renewable energy generation is minimal—have driven up gas demand for power generation. Anne-Sophie Corbeau, a global energy researcher at Columbia University, reported that industrial gas demand in nine northwest European countries rebounded by 6% year-on-year from January to November 2023.
The rate of gas depletion varies across member states. The Netherlands has seen a 33% drop in stored gas levels since winter began, while France has experienced a 28% decline.
Looking ahead, Russian gas supplies via Ukraine—currently accounting for around 5% of EU imports—are expected to cease at the end of 2024 when the transit agreement expires. While Andreas Guth, secretary-general of Eurogas, suggests there is no immediate concern about this supply interruption, he acknowledges that every marginal volume of gas will impact storage replenishment efforts.
