Europe could face a critical shortfall in gas stocks if disruption to shipping through the Strait of Hormuz lasts one to three months from now, as low inventories and distorted prices slow stockpiling, senior executives at Equinor said.
Gas caverns and tanks across Europe are currently just above 35 per cent full, below a seasonal norm of around 50 per cent, Gas Infrastructure Europe data showed.
Member states need to build a gas buffer during the northern hemisphere summer to reach an EU-imposed 90 per cent storage target between October and the beginning of December.
"If the war stopped tomorrow, with free flow to the Strait happening quickly, we could come to an acceptable, but tight storage level of 75 per cent, but if the closure continues for one to three months, it could become critical," Equinor Senior Vice President for Gas Power Trading Helle Ostergaard Kristiansen told Reuters.
Refilling gas storage for next winter already looked problematic at the beginning of March and little progress has been made since then due to current prices, with contracts for gas delivery in winter cheaper than summer.
Governments could intervene in the market with incentives and rules or the structure of prices must change with a rise in contracts for gas delivery in the winter compared with summer deliveries, analysts say.
"We saw that in 2022, when the governments imposed regulation on storage filling... it was very costly for them. So the market itself can probably balance the situation through price signals," Peder Bjorland, Equinor's vice president for gas trading, said on the sidelines of the Flame energy conference in Amsterdam.
He added that elevated prices could curb gas consumption significantly - through fuel switching to coal, an increased use of renewable energy and a fall in fuel demand by the industry - helping a rebalance.
"If we have prices up to what we saw in the beginning (of the Iran war), around €60-70 per megawatt hour, then we have estimated that gas to power alone could actually result in a reduced demand of around 10 billion cubic metres," Bjorland said.
European gas prices at the Dutch TTF gas hub were hovering around €50/MWh on Thursday, having risen in March to €74/MWh, their highest level since January 2023.
(Reporting by Francesca Landini; Editing by Emelia Sithole-Matarise)