Europe is set to enter the cooler months with gas stores at their lowest level in 13 years, prompting warnings of “winter panic” from energy experts and traders. In the last week of August, the EU’s gas stocks were 63% full, significantly below the 80% average for late August in recent years.
Greg Molnar, a gas analyst, stated that the EU is likely to enter the winter heating season with gas stocks approximately a fifth below the five-year average, marking the lowest level since 2013. Molnar noted that low storage levels are increasing the risk of heightened winter price volatility, which could be exacerbated by cold spells or slow wind patterns.
The UK, identified as one of Europe’s largest gas consumers but with limited domestic gas storage capacity, may face particular exposure to market volatility. Chris O’Shea, chief executive of Centrica, the owner of British Gas, indicated that the UK has “almost no gas in storage” for the upcoming winter.
The EU’s gas stores have struggled to reach an 80% target by winter, following disruptions to oil and gas exports from the Gulf region due to the US-Israel war on Iran. A cold end to last winter and increased gas power generation during summer heatwaves have also contributed to depleted stocks.
Benchmark gas prices have recently risen to three-year highs, exceeding €68 per megawatt-hour (MWh), more than double the price at the start of the year. Analysts at Goldman Sachs suggest that without a return of gas exports from the Middle East, Europe’s benchmark price might need to surpass €100/MWh to attract sufficient gas shipments for winter demand.
Ofgem, the UK energy regulator, announced that typical gas and electricity bills will increase by 4% from October under its quarterly cap. This follows a 13% rise at the beginning of July, reflecting global energy market price increases linked to the war on Iran.