Europe Faces Another Year of Elevated Gas Prices as Storage Levels Fall

• European households and industries face at least another year of high gas prices, even if the Iran war is resolved and winter proves mild, as the continent will need ​to rebuild gas storage reserves from record-low levels.
• The Middle East conflict has sharply reduced LNG exports from Qatar and the United Arab Emirates, with flows through the Strait of Hormuz remaining well below pre-war levels. This has forced European buyers to compete more aggressively for alternative cargoes, supporting higher wholesale gas prices.
• Against this backdrop, European natural gas prices have risen more than 150% so far in 2026, while gas storage in the region is expected to be only 75% - 78% full by November 1, around 10 percentage points below the five-year average. This leaves Europe more exposed to a cold winter or further supply disruptions and could require substantial restocking next year.
• Higher wholesale costs are already feeding through to consumers, particularly in Germany and the UK, and further increases are possible as household and business supply contracts are renewed. Elevated gas prices could also add pressure to inflation and energy-intensive European industries.
• Looking ahead, Europe’s dependence on alternative LNG supplies could increase further from 2027, when the European Union’s (EU) planned ban on Russian LNG imports takes effect. This could further complicate efforts to rebuild depleted inventories.
• Europe’s low storage position means that the impact of the current supply shock could extend beyond this winter. The need to rebuild inventories while Russian LNG is phased out could sustain competition for global cargoes and keep gas prices elevated even if Middle East supply disruptions ease, prolonging pressure on inflation, households and energy-intensive industries.

(Source: Reuters)