Europe Drives Gas Prices Toward a New Rally

Europe is heading toward another gas-price rally as it tries to refill storage sites that remain unusually low at the end of summer. The scramble could push winter prices above 100 euros per megawatt-hour.

Bloomberg calculations cited by Kathimerini estimate that Europe still needs at least 100 terawatt-hours of gas, worth more than 7 billion euros at current prices, to reach even the lower 75% storage target. Meeting that goal would require buying at a late-season pace not seen since the 2022 energy crisis, Goldman Sachs, Rystad Energy and Morningstar warn.

The European Union began building larger reserves after that crisis to protect against future shocks as it moves away from Russian pipeline supplies. But the war in Iran has driven up short-term gas prices and made storage more expensive. Germany and other countries are struggling even with recently relaxed targets.

Governments and utilities held back from buying, hoping liquefied natural gas flows would normalize and prices would fall before winter. That improvement has not arrived. Persian Gulf supplies remain nearly stagnant, and LNG carriers are making far fewer trips through the Strait of Hormuz than oil tankers. Prices have consequently more than doubled from a year ago.

Europe is not expected to face an outright gas shortage because it can pay more, but that purchasing power could squeeze poorer buyers such as Pakistan and Bangladesh. Bond markets are already showing concern that higher gas prices will revive inflation and force central banks to raise interest rates more aggressively. Much will depend on the severity of the winter, with weather patterns potentially bringing milder conditions at first before colder temperatures lift demand.