As Europe faces its first significant cold snap of the season, gas reserves are being rapidly depleted, marking the earliest and most substantial drawdown since monitoring began in 2015. Between November 1 and 25, nearly 9 billion cubic meters of gas were withdrawn, over twice the five-year average for the same period.
The filling rate of Europe's gas stocks has dropped from 95% at the start of November to 87.4%, with some countries, including France and the Netherlands, falling below pre-crisis averages. This early decline highlights vulnerabilities in Europe's energy infrastructure as it balances high demand with limited supply.
Factors Driving Gas Depletion
- Cold Weather and Increased Consumption:
A combination of colder-than-usual temperatures and reduced output from solar and wind energy has driven up gas demand for heating and electricity generation. - Reduced Gas Deliveries:
While LNG imports have increased, overall gas supply is 18% lower than the five-year average, with a nearly 25% decline compared to pre-war levels. Russian gas, although still flowing through some pipelines, faces additional risks, including the planned closure of transit routes through Ukraine starting January 2025. - Structural Changes in Demand:
Despite lower consumer and industrial demand, the current supply-demand imbalance has forced Europe to tap into its reserves much earlier than anticipated.
Country-Specific Impacts
- France and the Netherlands:
With current filling rates of 82.7% and 76% respectively, these nations are below the European average and pre-crisis levels. - Belgium:
The Loenhout storage site saw its reserves fall from 98.2% to 87.2%, mirroring the broader European trend. - Romania:
Among the countries with the steepest declines in storage levels.
The Dutch TTF reference price for December gas deliveries recently surpassed €48 per megawatt hour, marking the highest level of 2024 and over twice its pre-crisis value. Prices for spring 2025 deliveries have climbed even higher due to concerns about the upcoming restocking season.
Europe faces stiff competition for LNG, particularly from Asia, where demand is also rising. A colder-than-average winter could exacerbate the situation, making replenishment of reserves by March more expensive and challenging.
With the early depletion of reserves, Europe could struggle to meet future demand without significant price hikes or additional supply sources. The suspension of Russian deliveries to Austria and the impending closure of the Ukraine transit route further heighten risks for Central European nations like Hungary and Slovakia.
If colder temperatures persist through March, as predicted by the European Centre for Medium-Range Weather Forecasts (ECMWF), Europe may find itself in a precarious position. Low reserves could lead to higher costs for replenishment and intensify reliance on volatile LNG markets.
Policymakers are under pressure to address energy supply challenges, including accelerating investments in renewable energy and improving energy efficiency. In the short term, ensuring sufficient gas imports and managing consumption will be critical to navigating the winter without exacerbating economic and energy security concerns.
