Facing its second energy crisis in four years, Europe is entering winter with its lowest gas storage levels on record. This is a calculated gamble, not an oversight.

European gas inventories currently sit at just 67% capacity, a drop of 13 percentage points compared to the same time last year and marking a 15-year low. The European Commission issued a statement last week asserting that current low storage levels are "not a cause for concern," citing Europe's significantly reduced dependence on gas since 2022. Behind this stance lies a deliberate choice by several European governments: they prefer to bet on a mild winter rather than risk repeating the 2022 scenario of mass hoarding at high prices, which resulted in billions of euros in losses.

This strategy has direct implications for global energy markets. If Europe's bet fails and it is forced to turn to the spot market for large-scale replenishment during winter, US liquefied natural gas (LNG) exporters stand to benefit, while European gas prices could surge significantly. If the bet pays off, the European gas spot price, already up 75% since the end of June, may be kept in check.

Low inventories reflect deliberate choices

The historically low gas storage levels in Europe partly stem from disappointed market expectations. European buyers had reportedly hoped that the Strait of Hormuz would reopen to shipping by now, bringing Qatari LNG back to the market, lowering prices, and allowing Europe to restock at lower cost at the last minute. That expectation has yet to materialize.

At the same time, the European Commission has provided a structural justification for low inventories. Since the 2022 energy crisis, Europe has continuously adjusted its energy mix, with winter gas demand falling 17% compared to 2022. The increased share of renewable energy in the energy mix is a key driver. According to Wood Mackenzie data, Europe's working gas storage requirement for the heating season is now inherently lower than in the past, lending some rationality to keeping inventories low.

Germany's caution born from a €670 million lesson

Germany is the most representative example of this "avoid overpaying" approach. Its storage levels stand at only around 50%, far below Portugal and Poland's levels of over 90%.

This stance is closely linked to the painful experience of 2022. That summer, European gas prices hit historic records, and German market operator TradingHub Europe spent €8.7 billion (equivalent to approximately $10.1 billion today) purchasing gas at high prices for storage between June and October. Over the following two winters, this gas was sold back to the market, generating an estimated total revenue of only around €2 billion. According to Laurent Ruseckas, Executive Director at S&P Global, this "buying high, selling low" operation resulted in losses of approximately €6.7 billion, mostly borne by German gas consumers, with the government also absorbing part of the loss.

The German government is clearly determined to avoid a repeat. If additional costs are passed on to businesses and consumers, it would directly fuel inflation. With European spot gas prices having already risen 75% since late June, rushing to replenish storage now could push prices even higher.

The risk picture: in the worst case, storage could fall to 14% by spring

Europe's strategy is not without cost, and the risks are plain to see.

According to Wood Mackenzie's most optimistic scenario, if Qatari and Emirati LNG shipments recover quickly and reach the European market around November, Europe's storage levels could still fall to 21% by April 1, 2027, the end of the heating season.

If the Strait of Hormuz remains closed for the remainder of this year, that figure could be as low as 14%. Should Middle Eastern LNG supplies still not have normalized at that point, the EU would face the daunting task of refilling nearly empty storage sites at high prices in a tight market, at an extremely heavy cost.

Who stands to win: US LNG exporters poised to benefit

For US LNG exporters, Europe's gamble presents a potentially huge opportunity. If Europe is forced to turn to the spot market for large-scale procurement, US exporters like Venture Global and Cheniere Energy would directly benefit from higher prices. Of these, Venture Global stands to gain the most due to its greater exposure to spot prices.

However, a potential buffer is brewing. A strong El Niño climate system is expected to push European temperatures above normal this winter. If a mild winter materializes, gas demand would be subdued, buying Europe more time to wait for Middle Eastern LNG supplies to normalize and reducing the likelihood of being forced to buy at high prices.

Europe has already paid the price for panic-buying in 2022. This time, it is betting that staying calm and waiting for the right moment may be the least costly option.