IEA warns Europe faces gas shortages without Iran diplomatic deal

The International Energy Agency (IEA) has warned that Europe faces a gas shortage this winter unless a deal is struck with Iran by US President Donald Trump.

Supply and Storage Risks

The IEA stated in its quarterly gas report on Tuesday that gas reservoirs could shrink to "just 10pc full" if the Strait of Hormuz remains closed until early next year and the continent experiences a cold winter. The agency noted that once storage sites fall below 30pc of working capacity, the rate at which gas can be delivered to European homes and factories begins to slow.

"This would leave the European market exposed to late cold spells," the Paris-based IEA said. The agency added that "the overall weak EU storage position leaves the Continent more exposed than usual to market and weather shocks."

Currently, Germany's gas storage tanks are less than two thirds full, which is below the legal requirement to reach 80pc capacity before winter demand increases. The IEA noted that the closure of the Strait of Hormuz since March has locked up one fifth of the world's gas supply. While the US has increased gas exports, the IEA stated this has not fully offset the loss of Qatari supplies, noting that Korea and Japan often outbid European customers for US gas.

Diplomatic and Market Context

The IEA's warning follows reports regarding US President Donald Trump's efforts to end Iran's blockade of the Strait of Hormuz. While reports last month suggested Mr. Trump might resume bombing Iran as soon as Wednesday, Axios reported on Monday that he told Israeli Prime Minister Benjamin Netanyahu he wanted to give diplomacy more time.

Iranian media reported on Monday that Mojtaba Khamenei, Iran's supreme leader, had authorized peace talks with the Americans following weekend talks with Qatari mediators. Following these reports, European gas prices dropped more than 10pc to just above €93 per megawatt hour. However, the IEA noted that the spot price of European gas in the third quarter was 90pc higher than a year earlier.

Industry Outlook

Patrick Pouyanne, the chief executive of TotalEnergies, stated on Monday that Europe would not face a gas shortage but would instead suffer much higher prices.

"We assumed people would anticipate gas prices rising more rapidly. Instead, the markets acted as if the war would end this summer," Pouyanne said. "We will pay more than others, it's simple."

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Sources

• sg.news.yahoo.com: Europe faces gas shortage without Iran deal, says IEA - Yahoo News Singapore
• yahoo.com: Europe faces gas shortage without Iran deal, says IEA

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.