Europe Braces for LNG Shortage as Winter Approaches

The global energy market is bracing for a potential 'fight for fuel' as both Europe and Asia compete for a shrinking pool of liquefied natural gas (LNG) supply. According to Go Katayama, principal insight analyst for LNG at intelligence firm Kpler, the war in the Middle East has crippled LNG supply from Qatar, causing prices in Europe and Asia to skyrocket.

The situation is exacerbated by the fact that Europe is heading into winter with one of the lowest levels of gas in storage in nearly two decades. The EU storage sites are currently about 66% full, well below the five-year average of over 80%. To reach even its lowest storage target of 75%, Europe still needs to buy gas worth over $8.1 billion at current prices.

The high prices have discouraged stockpiling for most of the summer, but analysts warn that competition between Europe and Asia will intensify as winter approaches. LNG netbacks currently favor sending spot LNG to Europe over Asia, but this may change if Qatari LNG remains absent from the market through year-end.