Europe's gas market appears balanced for now, but underlying fundamentals point to a tighter outlook than current prices suggest, Wood Mackenzie said in a note on Wednesday.
The consultancy's short-term European supply-and-demand models indicate that price signals remain too weak to encourage sufficient gas storage injections ahead of winter.
In a market that relies heavily on storage to meet seasonal demand, inadequate replenishment in the current day increases the risk of tighter conditions later, particularly if supply disruptions persist or demand strengthens.
Wood Mackenzie said end-of-summer storage levels are likely to fall below what is typically considered comfortable heading into winter.
As a result, end-of-winter inventories could decline into a range where deliverability constraints and scarcity risks emerge, especially during colder weather or supply outages.
Europe's current stability has been supported largely by weaker demand. Lower industrial activity, subdued power consumption and mild weather have reduced gas use, while limited growth in LNG supply has been offset by demand destruction.
However, the cushion is narrowing. Wood Mackenzie said Europe's balance has also benefited from weak Asian LNG demand, which redirected cargoes toward Europe amid market disruption.
That dynamic is beginning to reverse as Asian buyers return to the market to meet summer cooling demand and rebuild inventories ahead of winter, increasing competition for LNG supplies.
At the same time, volatility has returned to levels comparable with 2022, although price movements are increasingly driven by geopolitical developments, shipping disruptions and real-time information flows rather than supply-demand fundamentals. This can obscure underlying market tightness and weaken the relationship between prices and physical balances.
The consultancy said trading strategies are increasingly focused on risk management, with greater use of hedging, options and structured exposures.
Wood Mackenzie said the market now hinges on three factors: a forward curve that does not fully reflect supply risks, a European balance dependent on weak demand, and intensifying global competition for LNG.
Together, these factors suggest Europe's gas market is tighter than it appears and that prices may need to rise to restore equilibrium.