The International Energy Agency (IEA) has recently published a report highlighting the concerning state of gas storage in the European Union and the likelihood of continued natural gas supply constraints in the global market until next year. This international body stated that the low level of gas storage in Europe and existing supply disruptions from Middle Eastern producers could pose serious challenges for EU member countries during the cold months of the year.
Gas Storage Situation in the European Union
The IEA's report indicates that the European Union may end the winter seasons of 2026 and 2027 with minimal gas storage levels. This situation significantly increases the need for gas injection into storage facilities in the summer of 2027 and creates the possibility of continued supply constraints until 2028.
Read more: Golestan Gas Company to Manage Gas Consumption in Winter with 3 Scenarios
For the past four years, following the energy crisis, major European countries have been grappling with unprecedented gas price increases. Now, as winter approaches and energy demand peaks, concerns about the risks ahead for next year have cast a shadow over future contract prices. Currently, the price of contracts for delivery in May next year is higher than that for November 2027, indicating the market's assessment of supply-related risks.
Market Impacts and Agency Forecasts
The International Energy Agency has predicted that in the worst-case scenario, if disruptions in LNG supply from the Strait of Hormuz and extreme cold weather continue, the gas storage levels in the European Union could drop to below 10% of their operational capacity by the end of March. This figure would be considered the lowest recorded and leaves the European market vulnerable to late-season cold waves.
Moreover, the agency has forecasted that despite new capacities in the LNG sector next year, the market will still face supply constraints. Gas demand in Europe is expected to decrease by 3% in 2026, but this reduction alone cannot resolve the supply issues. Additionally, manufacturing plants in Europe will reduce gas consumption by 5% due to rising prices.
The International Energy Agency estimates that disruptions in trade flows from the Strait of Hormuz will continue at least until the end of this year. Therefore, it is anticipated that global LNG supply will decrease by 3% this year, marking the largest annual decline ever recorded.
Read more: Record Replacement of Gas Network Valves in Qom by Ali Goudarzi · LNG Price in Rotterdam Rises to $1873 per Ton
