LNG supply disruptions, strong Asian demand, and distorted gas pricing have made refilling storage unusually difficult and expensive across the EU.

Equinor warns prolonged disruptions could push Dutch TTF gas prices toward €90/MWh, forcing industrial demand destruction and fuel switching across Europe.

Europe could face a critical shortfall in natural gas stocks if shipping disruptions through the Strait of Hormuz persist for another 1-3 months, senior executives at Norwegian energy giant, Equinor ASA (NYSE:EQNR), have warned. Europe entered the current summer refill season with severely depleted gas reserves, with gas stores only 28% full following a prolonged winter. Europe's storage levels are currently at 35-37%, significantly below the 50% seasonal norm, increasing the risk that the continent will miss its usual 90% target at the beginning of the next winter heating season. The European Union requires member states to maintain robust storage fill levels, typically targeting an 80% to 90% capacity by early winter. A combination of factors has made filling Europe's largest storage hubs a daunting task heading into the latter half of the year.

First off, heavy withdrawals during winter, driven by peak household heating, coupled with a spike in industrial power demand, depressed natural gas storage levels in Northwest Europe to below 30%, roughly double the EU's overall storage deficit. Gas levels in the Netherlands, Germany, and France fell to critically low levels before spring even began: Dutch reserves plunged to just 5.8% by the end of winter, marking the lowest level in a decade; storage levels in Germany dipped to ~20% while those in France hovered around 27% by the time spring kicked in.

Second, distorted pricing and inverted seasonal price curves have contributed to Europe's gas crisis, with an unusual market structure wherein summer spot prices are higher than winter contracts stalling necessary storage replenishment. Dutch TTF seasonal spreads have remained in negative territory to the tune of ~€ 1.3/MWh, with the unusual backwardation disrupting the traditional dynamics of injecting gas during the cheaper summer months and withdrawing it during the colder, high-demand winter season.  Europe has also been facing an LNG squeeze, with competing global energy demands and disruptions to major LNG facilities due to the Middle East conflict making replenishing stocks highly costly. Delays and infrastructure damage at key facilities particularly in Qatar combined with a phase-out of Russian LNG have intensified global competition for spot cargoes, particularly against high demand in Asia. The inverted curve has also been partially driven by expectations of an influx of new global LNG capacity later in the year, coupled with near-term supply concerns.