The escalation threatens to further disrupt liquefied natural gas (LNG) exports, as the Strait of Hormuz remains effectively closed.
These supply disruptions are occurring at a time when LNG supplies are critically important for Europe: the region is replenishing gas reserves in underground storage facilities ahead of the winter season.
Gas reserves in the EU are below typical levels
According to Gas Infrastructure Europe (GIE), they are 64.7% full. This is below typical levels for this time of year.
Low storage levels do not in themselves mean that the country will run out of gas in the winter. However, insufficient reserves make EU countries more vulnerable to sharp price fluctuations and disruptions in global supplies.
This is a particular cause for concern among businesses in Europe’s largest economy.
“If insufficiently filled gas storage facilities coincide with a very cold winter, Germany may no longer be able to fully meet its usual demand for gas,” said Sebastian Heinermann, managing director of the German Association of Gas Storage Operators (INES), in an interview with Euronews Business.
“If gas prices then rise above a level acceptable to industrial consumers, companies will be forced to cut back on production,” he added, noting that this could seriously damage the economy.
Analysts warn that a prolonged disruption to LNG exports from Gulf countries could force European buyers to compete more aggressively with Asian buyers for available shipments, which could put further pressure on European gas prices.
According to Goldman Sachs, such a price war could push wholesale prices to around 100 euros per MWh.
Follow our updates
