EU faces winter tug of war with Asia as gas stores hit lowest for date since 2011

Europe is heading into winter locked in a bidding war with Asia for LNG cargoes, with EU gas stores at record lows, the Financial Times reported on September 27.

EU storage sites were 69.6% full on September 20, holding 74.32bn cubic metres (bcm), against 81.6% a year earlier, according to Gas Infrastructure Europe data. The end-August reading was the lowest for the date since records began in 2011. Asia is already paying more: the Japan-Korea Marker (JKM) spot LNG price stood at $25.82 per mmBtu on September 25, against about $24 for Europe's TTF benchmark at €71.89 per MWh.

Until this summer Europe had leant on two cushions Asia did not have: Russian LNG, which the EU bought almost in its entirety, and a slump in Asian demand as prices doubled. Both are going at once, just as the gas crisis enters its heating season. Russian cargoes to Europe are shrinking ahead of a full EU ban on January 1, while Asian buyers that deferred restocking are expected back in the market by the end of the year.

Crude tanker prices have gone "bananas", in the words of the FT, as war around the Strait of Hormuz drives freight to records, and the emergency oil stocks and Chinese import cuts that have so far held crude below the levels a closure of the world's most important chokepoint was expected to trigger are being used up.

Russian LNG turns east

The EU has been the main market for Russia's Yamal LNG plant all year. EU terminals took 136 Yamal cargoes totalling 9.97mn tonnes in the first half, up 16% y/y and more than 97% of the plant's exports, according to Kpler data cited in an earlier analysis. Russian supply made up about 18% of EU LNG imports in the period, and France, Belgium and Spain were the biggest buyers.

Across January-August the EU took 88.9% of Yamal's exports and paid an estimated €7.28bn for them, more than in the whole of 2025, the German campaign group Urgewald calculated on September 11. Buyers have been front-loading deliveries under long-term contracts: short-term contracts for Russian LNG have been banned since April 25, the long-term ones run out on December 31, and a complete import ban takes effect on January 1, 2027.

The flow has since turned. EU imports of Russian LNG fell to a multiyear low in August after the summer opening of the Northern Sea Route let Yamal's ice-class carriers sail straight to Asia, Energy Intelligence reported on September 15. Urgewald counted seven EU-bound cargoes in August carrying 497,945 tonnes, against 11 a year earlier.

China picked up the slack. It imported 951,150 tonnes of Russian LNG in August, up 53% m/m, making Russia its second-biggest LNG supplier behind Australia. Washington is also squeezing the trade: the Graham-authored hellish sanctions law signed by President Donald Trump in September covers foreign vessels that knowingly carry Russian LNG, with a first review of targets due by October 18.

Asia can outbid Europe

Japan is more exposed than Europe. It relies on imported LNG for all of its gas and generated about a third of its electricity from gas in 2024, according to the US Energy Information Administration. Europe still has Norwegian pipeline gas and Russian flows through TurkStream, which delivered an estimated 12.55 bcm to European customers between January and September 20.

Asian spot LNG prices have more than doubled since the US-Israeli war with Iran began at the end of February, and Asian demand is on course to fall for a second year, by 3-10% on analysts' estimates. That fall has left more cargoes for Europe so far. It is also temporary: Kpler expects Chinese buyers to put off restocking only until late December or the first quarter of 2027, bringing them back into the market in the depths of Europe's winter.

QatarEnergy, which normally ships about a fifth of the world's LNG through Hormuz, has about 17% of its capacity offline after damage at Ras Laffan, and the International Energy Agency (IEA) expects combined Qatari and Emirati LNG output to fall by about 45%, or some 54 bcm, this year. Wood Mackenzie expects prices to stay high even if Hormuz reopens by the end of the year, because Europe will be bidding to rebuild depleted stocks.

Brussels has already lowered the bar. The 90% storage target can now be met at any point between October 1 and December 1, with a 10-percentage-point deviation allowed in difficult market conditions and a further five points at the Commission's discretion, and the Commission has urged member states to use that flexibility rather than buy at any price. Traders expect stocks to peak at about 75%, the lowest since at least 2011, Energy Intelligence reported on September 24. Germany, with the bloc's largest storage capacity, was only 57% full.

Tankers go bananas

The unfolding energy crisis is driving up costs across the board as winter approaches, not just LNG prices. Five-year-old supertankers now sell for more than new ones, because buyers are pricing ships by how quickly they can be delivered rather than by age, the FT reported on September 27.

A very large crude carrier (VLCC) available for immediate delivery has fetched about $200mn and one for October delivery $169mn, against about $135mn for a newbuild that will not arrive for years, according to a republication of the FT report. Day rates for VLCCs carrying crude from the Middle East to Asia have hit a record $1.2mn. Broker Braemar told the paper delivery time had overtaken age as the main factor setting prices, and Alexander Saverys, CEO of Belgian shipowner CMB Tech, described 2026 as a market he did not expect to see again in his lifetime.

Iraq's oil minister told parliament the cost of shipping Iraqi crude had risen to $37 a barrel from $26, and Saudi Arabia's energy ministry blamed Iranian attacks and disruption at Hormuz for the jump.

Borrowed time for oil

Oil prices remain a carwreck waiting to happen, but the dynamics are much more complicated than with gas. Hormuz is still not open. Iran will not allow free passage through the strait while US sanctions and a naval blockade remain in place, President Masoud Pezeshkian told the UN on September 23, and tankers that sail run the risk of attack. Flows through the most important of the world's chokepoints have recovered to about 13.5mn barrels a day (b/d) on a seven-day average of Kpler data compiled by Commodity Context, against about 20mn b/d before the war, largely thanks to a surge in Saudi loadings.

Two buffers have kept oil cheaper than the scale of the disruption implied. IEA members agreed on March 11 the largest coordinated release of emergency stocks on record, 400mn barrels, more than double the 182mn released in 2022. Shipbroker Poten & Partners has since put the total at 426mn barrels, of which the US supplied 172mn, taking its Strategic Petroleum Reserve to a 43-year low of about 308mn barrels before releases stopped on July 9. Observed global inventories had fallen by a cumulative 410mn barrels by the end of July, the IEA said in August.

The second buffer is China. Its crude imports fell 32% q/q to 8.1mn b/d in the second quarter, and in May and June dropped below 8mn b/d for the first time since 2016, as refiners drew on stocks rather than pay war prices, according to the US Energy Information Administration. China drew on its reserves again in August, for the third month in four, burning about 640,000 b/d more than it imported and produced, Reuters columnist Clyde Russell calculated on September 15. He put Chinese strategic and commercial stocks at no less than 1.2bn barrels. Road-fuel demand is also falling structurally as electric cars and LNG-fuelled trucks spread.

Brent traded at $104.32 a barrel on September 25, below the $120/b monthly average it hit in April and well short of the spike many traders expected from a closed Hormuz, but up almost 20% in a month. The IEA warned in August that "previously available inventory buffers are rapidly depleting", and emergency stocks cannot replace an open strait: once they are gone, the lost Gulf barrels have to be priced back in. The US will also start taking back loaned SPR oil, with a premium, from November.

China's ability to switch its purchases on and off against a stockpile of that size has turned it into the market's swing buyer. For decades Opec set prices by controlling supply; this year the biggest single influence on prices has been whether Beijing chooses to buy. When Chinese refiners return to restock, they will be bidding against the same Western governments that need to refill their emergency reserves.

The same pressure is building in refined products, where Europe faces a diesel squeeze and growing reliance on US supply, and in gas, where the EU is due to phase out Russian gas by the end of 2027.