Europe is gambling on a mild winter rather than curbing demand for natural gas, leaving it dangerously exposed amid global LNG bidding wars and low domestic reserves, the Institute for Energy Economics and Financial Analysis said on Thursday.
Europe will enter the winter heating season with gas storage levels at their lowest point since 2011, sitting near 68% in mid-September, according to the institute.
Higher prices in the summer relative to winter forward contracts removed commercial incentives to inject gas, leaving the continent with a critically thin buffer against sudden cold snaps or supply shocks, IEEFA said.
Europe has severed its reliance on Russian pipeline gas, but it has swapped that vulnerability for heavy dependence on the global liquefied natural gas market.
With roughly 60% to 70% of European LNG imports now sourced from the US, and key Middle Eastern transit routes through the Strait of Hormuz disrupted, European buyers are forced into fierce, high-cost bidding wars with Asian competitors for flexible spot cargoes, it said.
Compounding these pressures, the European Union faces an impending complete ban on remaining Russian LNG imports starting January 1, 2027.
While increased pipeline flows from Norway and the UK have helped offset losses, market analysts noted that shifting suppliers does not solve the root issue.
Without demand reduction and acceleration of renewables, Europe remains at the mercy of volatile international markets it cannot control, IEEFA said.