EU gas stockpiles deplete at fastest rate since 2021 energy crisis

The European Union is depleting its gas storage reserves at the fastest rate since the energy crisis three years ago, as colder temperatures and reduced liquefied natural gas (LNG) imports push up demand for energy.

Financial Times reports citing data from Gas Infrastructure Europe that the EU's gas storage facilities have seen a 19% drop in volume from the end of September — when the refilling season ended — to mid-December, per Caliber.Az.

In comparison, over the past two years, gas storage levels only saw single-digit declines over the same period, as milder temperatures and reduced industrial demand helped keep reserves relatively full.

"Europe has had to rely much more on its underground storage this winter than in previous years to make up for lower LNG imports and increased demand," said Natasha Fielding, head of European gas pricing at Argus Media.

The slowdown in LNG imports is partly due to increased competition from Asian buyers, who have been drawn to Europe’s lower prices. This has meant more reliance on gas reserves, which were already running lower due to disruptions in supply.

The last time gas storage was emptied at such a rate by mid-December was in 2021 when Russia began cutting pipeline gas deliveries ahead of its invasion of Ukraine. Currently, EU gas storage levels stand at 75%, slightly above the 10-year average, though this is a marked decline from the 90% levels seen in December 2022.

Despite a 90% drop in European gas prices compared to the summer of 2022 — when prices peaked above €300 per megawatt-hour — drawing down on reserves during the winter months could complicate efforts to refill stocks next year. Traders are already predicting higher prices for summer 2024 deliveries, signalling the growing cost of replenishing reserves.

Under the European Commission’s mandatory refilling target, EU countries are required to have storage filled to 90% of capacity by November 1 each year, though some countries have lower targets. However, the EU now relies increasingly on LNG, which has become more politically charged. US President-elect Donald Trump has warned the EU that it must commit to buying more US oil and gas or face tariffs, while Qatar has threatened to cut LNG exports if new EU regulations penalize companies for failing to meet strict carbon emissions and labour standards.

The US is the EU's largest supplier of LNG, while Qatar ranks third.

Europe's rising gas demand has been exacerbated by a spell of cold weather and periods of "Dunkelflaute" — days when both solar and wind power generation are minimal, leading to higher gas consumption for electricity production. Demand for industrial gas in northwest Europe has also rebounded by 6% in 2023 compared to last year, according to Anne-Sophie Corbeau, a global research scholar at Columbia University's Center on Global Energy Policy.

Certain countries have faced more rapid declines in storage than others. The Netherlands, for instance, saw a 33% drop in stored gas since the start of winter, while France experienced a 28% decline.

Looking ahead, Russia's gas shipments through Ukraine, which account for around 5% of EU imports, are expected to cease by the end of 2024 when a key transit deal expires. While some experts downplay the potential disruption, others warn that every extra volume of gas will be crucial for the EU’s refilling season next year.

Andreas Guth, secretary-general of Eurogas, a European gas industry body, remarked, "There doesn't seem to be a major concern about the cessation of Russian gas through Ukraine. However, every marginal volume is going to make a difference during the filling season."

By Tamilla Hasanova