EU fears panic gas purchases due to depleted reserves and war in Iran
Kyiv • UNN
Gas reserves in Europe have fallen below 30 percent due to the cold winter. EU countries are asking to lower storage norms to prevent price speculation by traders.
The EU fears panic buying amid dwindling gas reserves. Member states warn of mass speculation as the bloc prepares for mass gas purchases before winter, UNN reports with reference to Politico.
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The publication notes that there is growing concern about unusually low gas reserves in Europe, as the war in Iran threatens to provoke conflict between countries due to reduced global energy supplies.
The EU requires member states to maintain gas reserves at 90 percent of their capacity by winter — a measure introduced after Russia's invasion of Ukraine in 2022. But this year, a colder-than-usual winter depleted these reserves to less than 30 percent as of March, the lowest level since 2022.
With gas prices soaring after the Iranian attacks, which effectively closed the Strait of Hormuz — a narrow passage through which 20 percent of the world's liquefied natural gas passes, 6 percent of which was destined for Europe — the task of replenishing these reserves by winter carries a high risk.
Behind the scenes, officials and industry lobbyists warn that countries may rush to meet these targets simultaneously if the rules are not relaxed, leading to increased demand and allowing traders to take advantage of soaring prices.
It was this dynamic that led traders to push gas prices to over 300 euros per megawatt-hour in 2022, with high new storage targets exacerbating the surge in demand after supply cuts from Russia.
Analysts say that the difficulty of replenishing these reserves will also be exacerbated by fierce competition from Asia, which is more directly exposed than Europe to the impact of gas supplies previously made through the Persian Gulf. This could lead to higher gas prices in the middle of the year, reducing the incentive for traders to sell gas in winter and store it in spring and summer.
Officials emphasize that it is too early to draw conclusions. But already, several European governments are considering using existing exemptions that allow them to soften storage targets to reduce opportunities for wholesale purchases, according to three European energy officials familiar with the situation.
Meanwhile, at least three countries believe that the EU executive should introduce flexible measures beyond the existing system, including lowering the target by as much as 30 percent, two officials said. Countries also demanded a new EU mechanism to coordinate gas purchases, they added.
Such a policy would allow countries to more comfortably replenish gas reserves for winter. "With a lower target level, we would not stimulate demand for filling storage facilities at a very high level and would not raise prices," one source said.
The Commission has not yet decided how best to respond, sources said. But it has also openly raised the issue at both Monday's energy ministers' summit and previous meetings of ambassadors and national energy experts last week, according to the sources mentioned above and an EU official.
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Publicly, officials remain optimistic. For example, Germany's reserves are 22 percent full after Berlin tried to lower gas storage targets last year, but the country's economy minister, Katharina Reiche, downplayed the problem.
Others are concerned. "The current state of affairs is unsustainable — existing mechanisms do not sufficiently ensure the security of gas supplies, as incentives for filling gas storage facilities are insufficient," Sebastian Heinermann, managing director of the German gas producers' association INES, said in a statement on Tuesday.
The gas industry lobbying group Eurogas also warned that strict EU rules governing liquefied natural gas supplies, which can be supplied to the highest bidder, unlike fixed pipeline gas supplies, make selling to Europe less attractive to many exporters. This further reduces the EU's chances of securing much-needed fuel in an increasingly tightening market.