EU fears panic buying as gas reserves run low

BRUSSELS — Anxiety is growing over Europe’s unusually low gas storage levels as the war in Iran threatens to spark a fight among countries over dwindling global energy supply.

The EU requires member countries to maintain gas reserves at 90 percent of capacity by the winter — a measure brought in after Russia’s 2022 invasion of Ukraine. But this year’s colder-than-average winter depleted those reserves to under 30 percent as of March, the lowest since 2022.

With gas prices soaring after Iranian attacks effectively closed the Strait of Hormuz — the narrow passage through which 20 percent of the world’s liquefied natural gas passes, of which 6 percent was bound for Europe —  the task of refilling those reserves by the winter carries a greater risk.

Behind the scenes, government officials and industry lobbyists warn countries could rush to meet those targets all at once if the rules aren’t loosened, driving up demand and allowing traders to exploit soaring prices.

That’s the dynamic that caused traders to bid up gas prices to over €300 per megawatt hour in 2022, with the lofty new storage targets compounding the sharp rise in demand that followed Russia’s supply cuts.

Analysts say the difficulty in restocking those reserves will also be made more difficult by stiff competition from Asia, which is more directly exposed than Europe to the gas shipments that once flowed through the Persian Gulf. That could lead to higher mid-year gas prices, undercutting the incentive for traders to sell in the winter and store in the spring and summer.

Officials stress it’s still early days. But already, multiple European governments have considered invoking existing carve-outs that allow them to relax storage targets in order to reduce the scope for bulk buying, according to three European energy officials familiar with the matter.

Meanwhile, at least three countries believe the EU executive should introduce flexibilities beyond the existing framework, including lowering the target by as much as 30 percent, two of the officials said. The countries also sought a new EU mechanism to coordinate gas purchases, they added.

Such policies would allow countries to fill up for the coming winter more comfortably. “With a lower target we would not be driving the demand for very high storage level filling, [and] driving the prices up,” said one of the people.

The Commission hasn’t yet ruled on how best to respond, the people said. But it too has explicitly flagged the issue, both at a summit of energy ministers on Monday and previous gatherings of ambassadors and national energy experts over the past week, according to the people cited above and an EU official. A Commission spokesperson didn’t respond to a request for comment.

In public, officials remain sanguine. For instance, Germany’s reserves are running at 22 percent capacity after Berlin pushed to lower its storage goals last year, but the country’s economy minister, Katherina Reiche, has downplayed the issue.

Others are more nervous. “The status quo is unsustainable — existing mechanisms do not sufficiently ensure the security of gas supply because the incentives to fill gas storage facilities are inadequate,” Sebastian Heinermann, the managing director of German storage association INES, said in a statement Tuesday.

Gas industry lobby group Eurogas has also warned that tough EU regulations governing cargoes of liquefied natural gas — which can be shipped to the highest bidder, as opposed to fixed supplies of pipeline gas — makes selling to Europe less appealing to many exporters. That further squeezes the EU’s chances of securing desperately needed fuel on an ever-tightening market.