IEA urges strategic gas reserves as European prices hit 2023 highs

European gas prices climbed to their highest level since early 2023 on Wednesday as the International Energy Agency urged governments to build strategic gas reserves, warning that the continent's storage levels are dangerously low heading into winter.

The front-month Dutch TTF contract, Europe's benchmark wholesale gas price, traded above €79 per megawatt-hour on Wednesday morning, driven by months of disruption to liquefied natural gas shipments through the Strait of Hormuz amid fighting between the United States and Iran. EU underground gas storage facilities stand at just 67% full, well below the 80% level reached at this point last year, according to data from Gas Infrastructure Europe. German storage is even lower, at 53% as of September 1 — its worst level in 15 years.euronews+3

IEA Pushes for a New Approach

In its Gas Reserve Mechanisms and Flexibility Options report released Wednesday, the IEA argued that governments should move beyond rigid storage mandates and instead develop strategic reserves held outside the commercial market for release only during emergencies. Several EU countries, including Italy, Poland and Spain, already maintain national strategic gas reserves, with an estimated 12 billion cubic metres held across the bloc in 2025 — roughly 3.5% of annual consumption.euronews

The agency said governments should explore coordinating reserves at the EU or international level, and even floated the possibility of storing 10 to 15 bcm of gas in Ukraine once conditions allow. Other proposals include using older LNG ships as temporary floating storage and creating joint agreements to redirect LNG cargoes during shortages.euronews

Supply Crunch Deepens

The storage shortfall reflects multiple overlapping supply disruptions. The effective closure of the Strait of Hormuz, which previously carried about 20% of global LNG trade, has blocked shipments for several months. Meanwhile, strikes in March severely damaged two LNG production units at Qatar's Ras Laffan complex, removing 17 billion cubic metres of annual capacity — roughly 17% of Qatar's LNG exports — with repairs expected to take three to five years.euronews

Goldman Sachs The Goldman Sachs Group, Inc. ↘ 0.36% analysts have estimated that if Middle Eastern exports recover only gradually, the December 2026 TTF price may need to rise above €100/MWh to attract sufficient LNG to Europe.euronews

Adding to the pressure, the European Court of Auditors warned Wednesday that the EU's plan to phase out Russian energy is "faltering," with member states having committed just €54.3 billion of the €300 billion the European Commission estimated would be needed. The auditors noted that the EU's Russian gas phaseout, which includes a complete ban on Russian LNG imports from January 1, 2027, comes at a precarious moment.unn+1

Winter Risks and Rate Pressures

The energy crunch is already rippling through the broader economy. Eurozone inflation reached 3.3% in August, driven largely by higher energy costs, and markets are nearly fully pricing in a quarter-point interest rate increase from the European Central Bank on Thursday, which would bring its deposit rate to 2.5%. Investors have also sold European bonds on concerns that elevated energy prices will keep inflation and borrowing costs higher for longer.euronews

According to Oxford Economics, EU gas consumption remains 15% to 20% below its 2021 level, meaning the continent can function with lower storage — but at the cost of greater dependence on winter LNG imports arriving on time and in sufficient volume.euronews