The surge in European gas prices was one of the first consequences of Russia’s conflict with Ukraine in February, followed by supply cuts from Moscow aimed at the EU. While pipelines remain open for now, they operate at limited capacity. This has prompted investors (and governments) to plan for possible restrictions in gas use as we enter the winter months.
The data, however, is more encouraging than most headlines would suggest. Indeed, despite limited pipeline capacity, the bloc has, overall, been able to store gas in similar proportions to those seen in the last five years. There are disparities among countries (see chart), but nothing large enough to hint at a widespread energy shortage, at least for now.
However, if Russia were to shut down gas supply completely, although it’s in line with the historical norm, the amount of the fuel currently stored in European tanks would not last through the winter, short of severe cuts in usage. This is a major risk that investors should monitor over the next six months.