Europe needs to increase its historically low gas storage levels before winter, following months of weak injection operations, reduced liquefied natural gas (LNG) imports, and unfavorable market price differentials. An analysis by Montel, a specialist in energy market intelligence, reveals that
achieving the goal of raising European storage levels to 80% by November 1 requires the arrival of more than 140 LNG vessels monthly. Meanwhile, Europe is losing LNG shipments to higher-priced Asian markets and may need prices exceeding €60/MWh to attract
sufficient supplies during the remainder of the injection season. Montel's models indicate that European storage levels by November 1 will range between 69% (in the lower scenario) and 84% (in the higher scenario), depending on injection rates and LNG availability. This
suggests that the EU's ambitious target of reaching 90% storage levels will remain out of reach. Data from Montel's gas analytics platform showed that European gas storage sites were only 57% full at the end of July, about 12 percentage points
lower than last year and 16 percentage points below the five-year average, leaving the region significantly behind normal levels as the final months of the gas injection season approach. Germany faces a particularly acute challenge, with its storage levels reaching only
46% by the end of July. Joachim Endress, a gas market expert at Montel, stated that the continued disruption of LNG flows through the Strait of Hormuz means that pressure on Europe's gas market continues to mount as winter approaches. Europe faces
a growing LNG deficit amounting to 72 shipments. Net European storage injections between April and July amounted to only 325 TWh, about 11% below the five-year average and 18% less compared to the same period last year. Although gas injection rates in
June and July were similar to those in 2024, Europe entered these months from a much weaker position this year, as storage capacity had exceeded 80% by the end of July 2024. In April, Montel estimated that Europe would need approximately
130 LNG shipments per month between May and October to raise storage levels to nearly 80% by the beginning of November. Instead, average incoming shipments amounted to only 105 per month between May and July, resulting in a cumulative deficit of
about 72 shipments, equivalent to approximately 72 TWh of gas that could have been injected into storage. It is noted that achieving only 80% will require the arrival of more than 140 LNG vessels monthly during the remaining injection period (August,
September, and October), a level Montel currently considers highly unlikely without a significant rise in European gas prices or progress towards restoring LNG traffic through the Strait of Hormuz. As winter approaches, storage levels are likely to become an increasingly important
driver for European gas prices, alongside geopolitical developments and global competition in the LNG market. Europe is increasingly losing LNG shipments to higher-priced Asian markets. A key factor behind the weak injection season is the sharp decline in European LNG supplies. After
European LNG imports reached record levels in the first quarter, they steadily declined following the outbreak of conflict in the Middle East, with July imports falling to their lowest level in nearly two years. The loss of Qatari LNG supplies contributed
to the pressure, but Montel's analysis shows that the greater impact came from the redirection of U.S. shipments to higher-paying Asian markets. U.S. LNG shipments to China, Japan, South Korea, Taiwan, and India tripled between March and July, reaching record levels.
In July, U.S. shipments to these five markets surpassed those to Europe for the first time. Economic factors are increasingly favoring Asia; for most of the period since April, netbacks for U.S. LNG exported to Northeast Asia were higher than those
exported to Northwest Europe. In July, the profit margin for shipping U.S. gas to Asia via the Suez Canal was €5/MWh higher than supplying it to Europe. Montel estimates that Europe may need prices higher than €60/MWh to attract sufficient additional LNG
away from Asian buyers during the remainder of the injection season. The decline in LNG availability has been exacerbated by negative seasonal price spreads at key European gas hubs, such as the Title Transfer Facility (TTF). Summer contracts remained expensive due to
the direct impact of the Middle East crisis, while winter contracts reflected expectations that supply conditions might improve later in the year. This removed the usual financial incentive to buy gas during the summer, store it, and sell it during
the winter. Persistent negative margins may have long-term implications, as significantly reduced utilization rates at facilities like Rehden and Breitbrunn have already contributed to discussions about potential storage closures.
