EU Gas Storage Hits 15-Year Low Amid US-Iran Tensions
The European Union's natural gas storage levels have hit a 15-year low as tensions between the US and Iran persist. According to data from European Gas Infrastructure Europe (GIE), EU natural gas storage stood at 65.5% as of early this month, with stored volumes totaling about 742 terawatt-hours, more than 20% below the five-year average. This has raised concerns of a harsh winter ahead, particularly since gas drawn from storage typically covers around one-third of the bloc's winter consumption.
The delay in filling storage to the required 90% level before each winter is partly attributed to member states' optimism that the US-Iran war would end soon. However, with no resolution in sight, the situation has become increasingly dire. Goldman Sachs has forecasted that international oil prices could climb to $120 a barrel if maritime shipping disruptions in the Middle East worsen.
Another factor contributing to the shortage is the diversion of US liquefied natural gas (LNG) exports to Asia as prices there surged. After the EU halted Russian gas imports, around 70% of US LNG exports went to the bloc, but this share fell below 50% in June when Asian benchmark JKM price stood at about $17.33 per million British thermal units, above the European price.
EU gas prices have risen by approximately 75% over the past two months, touching a three-year high of 75.3 euros intraday on September 2nd. Filling storage now could drive prices higher due to increased demand. The EU Agency for the Cooperation of Energy Regulators estimates that filling storage would cost an additional 10 billion to 15 billion euros at a gas price of 50 euros per megawatt-hour, with the added cost likely to be considerably higher given current prices.