Europe's Winter Gas Worries Renewed Amid Hormuz Disruptions
The European energy crisis is far from over as the continent faces fresh concerns about natural gas security. The war in the Middle East has led to a surge in prices due to Iran's closure of the Straits of Hormuz, keeping liquefied natural gas (LNG) stocks unusually low ahead of winter.
The current level of LNG storage is at 58%, according to Gas Infrastructure Europe, which is the lowest since 2021. Typically, storage sites would be filled to around 75% to 80% by this time of year. European buyers had hoped prices would ease by summer, allowing them to fill storage tanks later for less.
However, the Dutch TTF contract, the benchmark for European gas, is currently trading between 55 euros ($63.4) and 58 euros per megawatt-hour, which is significantly higher than pre-crisis levels. Analysts are warning that supply risks to Europe remain elevated amid reduced LNG availability from the Middle East.
Europe's biggest single supplier, the United States, could also divert its supplies to domestic buyers if severe cold hits, driving up prices to painful levels for European buyers. If stocks continue to dwindle and winter proves rough, conservation measures may be necessary, as was the case in 2022.