IEA chief warns EU enters winter with record-low gas reserves

Fatih Birol, executive director of the International Energy Agency, warned on Wednesday that Europe is heading into winter with historically low gas reserves and cannot absorb further supply shocks. He spoke to Al Jazeera on the sidelines of an international conference in Berlin.

Birol said energy disruptions in the Strait of Hormuz, linked to the US-Israel war on Iran, are affecting every region but hitting Europe hardest, and that liquefied natural gas (LNG) prices are likely to rise in the coming months even if the Gulf conflict ends immediately. "The best day for a ceasefire would have been yesterday," he said.

Storage well below normal

European Union gas storage is only 72 percent full, compared with the usual 90 percent. Analysts estimate the shortfall is equivalent to the energy needed to power 10 to 12 million homes. EU energy ministers are weighing whether to ask households and businesses to cut consumption, according to news reports.

European countries normally build large gas stocks before winter, Birol said, adding that current levels are far below historical averages and that Europe is competing with Asian buyers who depend even more heavily on the Middle East. "I think if we have a harsh winter, we may see higher prices of natural gas in Europe," he said. "Life will not be easy for Europe this year and also next year."

Before the war, nearly a tenth of the continent's LNG passed through the Strait of Hormuz, but Iranian attacks on vessels have sharply reduced those flows. Birol said flare-ups in the alternative Bab al-Mandeb strait have only made matters worse, and that governments should have prepared earlier. Middle Eastern countries are now building and expanding pipelines that bypass Hormuz, he noted.

Diesel and emergency stocks

The EU also faces shortages of imported refined products, including the diesel used by its trucking, agricultural and industrial sectors. Birol said Ukrainian strikes on Russian refineries are contributing to a looming diesel shortage, with about a third of Russian deliveries halted.

In March, Birol coordinated the delivery of 400 million barrels of crude and diesel from G7 strategic reserves — the third time he has overseen an emergency release since Russia's invasion of Ukraine in 2022. He said the agency recorded a $20 fall in oil prices after G7 countries agreed to release reserves earlier this month, though prices are rising again. Gas has climbed 140 percent since February and Brent crude is trading above $100.

The EU still holds about 80 percent of its emergency stocks, and Birol said he hopes a fourth release will not be needed. "I really hope that both of the straits will be unconditionally opened sometime soon," he said, warning that global supply has little buffer left.

He also said he has never seen geopolitics dominate energy so heavily, describing energy as being treated as political leverage rather than a business.

Source: Al Jazeera.