European gas hits late-2022 highs on Hormuz crisis, low storage

European natural gas prices surged to their highest levels since late 2022 this week, driven by the effective closure of the Strait of Hormuz and dangerously low storage levels heading into winter. The Dutch TTF benchmark — Europe's key gas price reference — jumped above €83.75 per megawatt-hour on Monday before easing 0.7% on Tuesday to around €82.80/MWh as traders locked in profits.investing+2

The rally reflects a deepening supply crisis. EU underground gas storage stands at roughly 68% of capacity as of mid-September, far below the five-year seasonal average of 84% and short of the European Commission's 90% target for November. Prices have tripled since the start of the year as the conflict between the United States and Iran has effectively halted LNG tanker traffic through the Strait of Hormuz, cutting off approximately 20% of global LNG trade.voiceofemirates+3

A Supply Gap With No Quick Fix

Qatar, one of the world's largest LNG exporters, has repeatedly extended force majeure declarations and largely suspended shipments to European and Asian markets through autumn. A diplomatic meeting in Oman intended to negotiate safe tanker passage was abruptly postponed, leaving Qatari export flows severely constrained.etftrends+3

The disruptions have forced European importers into a bidding war with Asian buyers for scarce spot LNG cargoes. ING analysts Warren Patterson and Ewa Manthey wrote Tuesday that Europe "will struggle to hit its lower storage target of 75% ahead of winter," noting that moves in the JKM-TTF spread suggest Europe should be attracting spot cargoes but is failing to do so.fxstreet

Erisa Pasko, lead European gas analyst at Energy Aspects, told Anadolu Agency that inventories are expected to reach only about 69% of capacity by the end of October — a 14-year low entering winter. She warned that reaching a comfortable buffer of 88–90 billion cubic meters by November "looks unrealistic even if there is government intervention".aa

Winter Outlook Raises Alarm

Analysts caution that the worst may lie ahead. Massimo Di Odoardo of Wood Mackenzie said "low European inventories, strong Asian demand and limited new LNG supply growth almost guarantee elevated prices through this winter and into 2027". Goldman Sachs The Goldman Sachs Group, Inc. ↘ 0.36%, cited by Bloomberg, projected in August that European gas prices may need to exceed €100/MWh in December for the continent to rebuild sufficient inventory.aa

Bill Farren-Price, a research fellow at the Oxford Institute for Energy Studies, noted that Germany's storage sits at just 55.8%, the Netherlands at 52.5%, and Slovakia at 52.4% — leaving major economies particularly exposed. "If storage is not sufficient, it means that there is a higher risk that storage is depleted if there were to be a very cold winter or supply disruptions in the global system elsewhere," he said.aa

Meanwhile, Brent crude climbed above $113 a barrel on Tuesday after Saudi Arabia attributed an attack on its East-West pipeline to Iran-backed actors, an incident that could affect up to 4% of global crude supplies. The U.S. Federal Reserve began its two-day policy meeting Tuesday with markets pricing in a 90% chance of a rate hike, as persistent energy costs continue to fuel inflation.tradingpedia+1