Europe could need up to an extra 250 LNG cargoes this year at a cost of at least $11 bill.
This volume would be needed to refill its depleted gas storage ahead of next winter, with Ukraine requiring at least another 30 cargoes, according to analysts and data.
Demand during winter 2024/25 was higher than the previous year, due to colder and less windy weather, resulting in more withdrawals from European storage, which are now just under 34% full, the lowest level since 2022.
Based on current European Commission targets, set to help prevent supply shortages, following Russia's invasion of Ukraine in 2022, gas storage sites across the EU must be 90% full again by 1st November.
With less supplies coming by pipeline and more gas needed, Europe will need to rely on globally traded LNG and pay a premium to attract cargoes in competition with Asian buyers.
"Europe will have to buy fairly aggressively this spring and summer to refill inventories," Jason Feer, Global Head of Business Intelligence at energy and shipping brokerage Poten and Partners, said at a recent webinar.
Hitting the 90% target would require 57.7 bill cu m of net injections, 25.8 bill more year-on-year, or up to 250 extra LNG cargoes, according to analytics firm Kpler.
Based on the current benchmark European gas price of around €41 per MWh, this would be an additional cost of €10.3 bill ($11.1 bill) to refill storage sites this year, according to Reuters calculations.
Kpler has predicted an average gas price of $13.17 per MMBtu, or around €41.60 per MWh over the 1st April to 31st October injection season, up 19% year-on-year.
However, a few market players think that Europe will miss the target.
"What may happen is that the 1st November target is going to be delayed, so it will give more wiggle room or more room to manoeuvre for European importers to meet targets this year," Poten’s senior LNG analyst, Steven Swindells, said.
Indeed, the EC is considering relaxing storage requirements, with the latest proposal suggesting hitting 90% any time between 1st October and 1st December, while also accepting lower levels in some cases to ease market pressure.
According to Kpler, EU stores could be 76-78% full by 1st November and still be compliant with likely new regulations.
This would still require an additional 120 LNG cargoes year-on-year, analysts said.
Adding to the competition for supplies, Ukraine's gas stores are almost completely empty after attacks by Russian forces cut domestic gas production.
“We now estimate that Ukraine will need 3-6 bill cu m of gas imports to fill its storage," Kpler’s Regalado said.
LSEG analyst, Yuriy Onishkiv told a webinar that Ukraine would need to import up to 5 bill cu m, at least 3 bill of which would have to be supplied in the form of LNG from the US and delivered to terminals in Poland and Lithuania.
This translates to roughly 30 cargoes, based on Reuters calculations.
The refilling need has elevated gas prices for the summer, typically a period of low demand and used to buy gas for storage.
Summer contracts have even traded at a premium to next winters in recent months, and injecting LNG or gas into European storage is not expected to make traders any money, Feer said.
"That's certainly going to discourage storage fills unless that market structure changes," he said.
The first signs of such a change are perhaps emerging, with Europe's benchmark forward contracts becoming more expensive than nearer-term ones.
That, "signals that we can actually have incentives to inject at some point in the near future," Kpler's Regalado said.
Without such a market-based incentive, governments may need to offer subsidies to ensure stores are refilled, a move previously mooted by Germany.
