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The EU will need to spend at least €10bn more than last year to refill its gas stores ahead of winter, after the first cold season in four years left its reserves heavily depleted.
Following Russia’s full-scale invasion of Ukraine in 2022, the bloc agreed to refill storage to 90 per cent of capacity each summer, to avoid disruptions in the colder months. After this winter Europe’s gas tanks were two-thirds empty in March, requiring a significant effort and cost over the summer to restore them to normal levels.
“Europe had the first real winter since the war in Ukraine,” said Ano Kuhanathan, an analyst at Allianz Trade, which provides insurance to traders. He added that a lack of wind for renewable power generation had also pushed up the consumption of gas.
While gas prices are lower than a year ago, mainly because of lower demand from China, Kuhanathan estimated that it will cost about €26bn to meet the 90 per cent target by November. That compares with €16bn to fill them to 99 per cent last year.
EU countries have recently agreed to more flexibility in meeting the gas storage target, after criticism that the hard 90 per cent goal prompted summer price spikes as governments rushed to fill tanks.
Germany, which is heavily reliant on gas, was among the countries that most vocally called for greater flexibility after Brussels proposed their extension until 2027.
Revisions to the law could see the target reduced by 7 per cent, casting uncertainty over this filling season as the changes are unlikely to be enacted before the summer.
The EU spent roughly €100bn on importing gas and liquefied natural gas (LNG) in 2024, Kuhanathan said.
Ample gas reserves are crucial for smoothing prices and reducing the risk of countries having to compete on the open market for gas during surges in winter demand.
Eurogas, the gas industry body, said that policymakers should ensure “clear and early communication” of the measures.
“Storage obligations carry the risk of further exacerbating the problem of high and volatile wholesale gas prices,” it said.
Kuhanathan said gas traders are not rushing to refill storage because many of them believe prices have further to fall. But a push to refill gas storage at the end of the summer could also cause prices to increase, he warned.
Analysts at Morgan Stanley believe prices will rise by roughly 10 per cent from current levels over the summer because of the scale of the refilling job. Europe will need to increase imports of LNG by 45 per cent from last year for stores to be 80 per cent full, they said.
Last week, Peder Bjorland, the vice-president of gas trading at Equinor, Europe’s largest gas supplier, said the region would have to pay higher prices to outcompete China and other Asian buyers for gas over the summer.
“I think price is the most important tool in this game,” he told Reuters at a gas conference in Amsterdam. “China is coming back, and it can be competitive,” he added.
China, the world’s top buyer of LNG, has recently scaled back gas buying because of favourable weather and a weaker economic outlook. But a temporary truce in the trade war between Beijing and Washington, announced earlier this month, could now mean economic activity, and gas demand, pick up.
“If Asian demand for LNG cargoes picks up over the summer because of hot weather, the market could tighten and force prices higher,” warned Morgan Stanley in a research note.
