European Gas Prices Fall as Gulf Flows Increase and Escalation Fears Ease

Key Facts

European gas prices fell, according to a Reuters report published on the morning of November 12, as flows from the Gulf increased and traders grew less concerned about a possible return to escalation in the conflict. The market move reversed the third consecutive day of gains cited in the circulating account of the session. Reuters said prices "fell as flows from the Gulf increased and traders became less concerned about a return to escalation." The decline came against a backdrop of still-tight supply and inventories below their seasonal average. The market therefore balanced a short-term improvement in flows against broader concerns about gas availability during the heating season.

Data cited by Bloomberg on November 10 showed that the European Union's gas storage was 72% full on average, compared with a five-year seasonal average of 89%. The gap means storage entered the winter season below the usual level for this time of year. In Germany, storage was 59% full on November 10, according to the same report. Net withdrawals from storage in the previous week also jumped to nearly six times the level of the week before, as a cold snap boosted demand. The faster withdrawals add pressure to available stocks as winter consumption begins to rise.

The International Energy Agency said on November 3 that Europe had entered the heating season with its lowest gas inventories in more than a decade, and that tightness in the global market could extend through 2027. The agency attributed part of the squeeze to the effective halt of LNG flows through the Strait of Hormuz. It said this had reduced cargoes loaded from Qatar and the UAE by more than 60 billion cubic meters between March and October 2026. The agency said the disruption had pushed Asian and European prices to their highest levels since the 2022-2023 gas supply crisis. It also forecast that global LNG supply would fall 3%, or nearly 20 billion cubic meters, in 2026.

The agency warned that lower inventories increase Europe's reliance on global LNG supplies and leave it more exposed to a colder-than-expected winter or technical outages and other supply disruptions. Storage remains an important resource for meeting seasonal demand, typically providing 25-30% of the European Union's winter gas consumption. The bloc remains heavily reliant on pipelines and LNG, particularly supplies from Norway and the United States, Reuters said. In a market shaped by shipping flows, an improvement in Gulf flows may ease immediate concerns, but it does not erase the impact of low inventories. The risks center on whether available supplies can meet demand if the cold intensifies or cargoes or facilities are disrupted.

The International Energy Agency added that low European inventories, alongside limited storage options for gas importers in Asia and South America, could intensify competition for flexible LNG cargoes in the coming months. The competition could put upward pressure on spot prices, particularly during periods of high demand, the agency warned. Reuters reported on October 12 forecasts that European inventories would reach 75-78% of capacity by November 1, 2026, around 10 percentage points below the five-year average. The same report said benchmark European gas prices had risen by more than 150% during the year through that date, amid shipping disruptions through the Strait of Hormuz that had halted nearly 20% of global LNG exports from Qatar and the UAE. An analyst at LSEG told Reuters that Northwest European inventories could fall to around 20% at the start of April 2027 even in an average winter, and that a prolonged closure of the strait could add to the pressure to refill storage in 2027.

The impact of higher wholesale prices extends beyond the energy market. Reuters said consumers may feel the full effect of this year's increase in 2027, as retail contracts are renewed after periods of fixed pricing. That places daily price moves within a broader pattern of rising and volatile supply costs, even as prices fell in the November 12 report. Inventory levels, gas flows from the Gulf and shipping through the Strait of Hormuz will remain interconnected factors in the market balance during the heating season. The International Energy Agency also said tightness in the global market could persist through 2027, while competition for flexible cargoes may increase in the coming months. The impact on retail bills is expected to become clearer as contracts are renewed in 2027.