Europe faces another year of high gas prices, analysts say

European households and industries are likely to pay high gas prices for at least another year, analysts say. The continent will have to refill storage that has fallen to record lows, and that need will remain even if the Iran war ends and the winter is mild. European benchmark gas prices have risen more than 150% this year. Shipping disruptions in the Strait of Hormuz have trapped almost 20% of global liquefied natural gas (LNG) exports from Qatar and the United Arab Emirates, and buyers now compete harder for the spot cargoes that remain.rte+1

Analysts expect European storage to be 75-78% full by November 1, the usual end of the restocking season. That is about 10 percentage points below the five-year average. EU storage was 72% full at the start of October, compared with about 83% a year earlier, according to figures from the European Network of Transmission System Operators for Gas (Entsog). On September 1, storage was 65.4% full, the lowest level for that date since records began in 2011.reuters+2

A tight winter, and a tight summer

LSEG analyst Yuriy Onyshkiv said reserves in northwest Europe could fall to about 20% by early April even in an average winter. "It's not just this coming winter that we are tight, but we risk being tight the next summer," he said. ABN Amro said a cold winter could drain storage to 10-15%. The bank's senior energy economist, Moutaz Altaghlibi, called that level "very critical and challenging" for the next refilling season.rte

Supply will also get tighter in January 2027, when the EU's full ban on Russian LNG imports takes effect. Analysts at BNP Paribas do not expect the market to return to pre-conflict levels until 2028. Rabobank is more moderate and has kept its 2027 forecast at about €45 per megawatt-hour, though that is still roughly €20 above its earlier forecasts for that year.rte

Households will feel most of this year's price rally in 2027, as fixed-term retail contracts expire. In Germany, the price comparison site Verivox said gas tariffs for new customers have already risen 55% this year.rte

Britain's thin buffer

UK gas prices have reached their highest level since December 2022. Underground storage in Britain was only 48% full at the start of October. In 2024, the country's storage capacity was equal to just 5% of annual demand, compared with an EU average of 29%. Consultancy Cornwall Insight expects the household price cap to rise 16% to £1,999 in January. That would come on top of a 4% rise this month, which took bills to a three-year high. The outlook adds pressure on Prime Minister Andy Burnham's government ahead of its October 28 budget.eciu+1

Neil Quilliam of Chatham House said a physical shortage is unlikely, but warned that "the margin for error is becoming uncomfortably small". Jess Ralston of the Energy and Climate Intelligence Unit said the price spike shows "the UK remains exposed to wars and instability thousands of miles away because we're still so reliant on gas".thenationalnews+1