Europe's energy future at crossroads: High gas prices and low storage levels raise alarm Analysis by Bloomberg

Since the invasion of Ukraine, Europe’s gas storage has become a critical factor in securing energy supply. With a network of storage sites across the European Union, the region relies on this infrastructure as a buffer against supply disruptions and price spikes.

However, according to Bloomberg's estimates, 2025 could bring added pressure as winter demands and the difficulty of replenishing reserves take a toll, Caliber.Az reports.

In the winter, Europe depends on its gas storage to cover up to 50% of daily consumption during cold spells. This is especially vital when gas suppliers, such as Norway, Algeria, Qatar, and the US, cannot meet the full demand. Historical disruptions, like the Russian-Ukraine gas disputes, have highlighted the importance of storage as a safety net.

During the summer, when energy demand is lower, Europe can refill its gas storage. Despite global competition for LNG cargoes, the warmer months allow for the injection of excess gas, which is influenced by market prices and demand from other regions like Asia and Latin America.

In response to the energy crisis triggered by Russia’s invasion of Ukraine, the EU introduced legally binding storage targets in 2022 to ensure security of supply. These include a 90% fill requirement by November 1 each year, with interim milestones throughout the year. While some countries struggled to meet targets in February 2025, there were no penalties, but continued non-compliance could prompt EU intervention.

By February 2025, gas reserves were just 50% full, a significant drop from the previous year. This depletion, caused by a colder winter and increased demand, has raised concerns about how quickly Europe can refill its reserves for the next winter. With gas prices at a two-year high, the cost of refilling storage is straining both consumers and governments, particularly in countries like Germany and the UK, which are also facing recession risks.

Purchasing gas for summer 2025 has become more expensive than for the following winter. In January, the price spread between summer and winter contracts reached its widest in three years, and by February 10, the spread was still elevated at around €5 per megawatt-hour ($5.16 per megawatt-hour). This price gap equates to an estimated €3 billion deficit for the gas Europe needs to add to its storage to meet its 90% target. This poses potential losses for energy companies, traders, and even some consumers, such as Vitol Group, Shell Plc, and RWE AG, who stockpile gas.

To ensure the security of supply, EU governments have the power to intervene and mandate gas purchases. Some countries, like Italy and Austria, have state-controlled reserves that could be tapped in emergencies. These reserves cover around 11% of the EU’s total storage capacity. Europe’s gas storage sites are often vast underground facilities, such as Germany’s Rheden, which spans the size of over 900 soccer fields, offering an essential safeguard for the region.

By Tamilla Hasanova