EU: Russian supply cut will reduce gas storage filling rate to below 75%

The reduction in Russian supplies is testing the EU's unity in dealing with the conflict between Russia and Ukraine as the bloc searches for ways to reduce gas demand to avoid a fragmented energy market. Rising gas supply disruptions following EU sanctions on Russia have prompted member states to step up preparations for winter and seek to replenish depleted stocks.

At a ministerial meeting in Luxembourg on Monday, European Energy Commissioner Kadri Simson urged more energy-saving measures and efficiency gains to reduce the likelihood of gas rationing, while German Economy Minister Robert Habeck warned of possible gas shortages in his country and called for European solidarity.

“We are working to avoid or minimize potential cuts and the preparedness package planned for July will propose precautionary demand reduction measures,” Simson told reporters after a ministerial meeting.

The biggest challenge for the EU is to ensure that there are enough reserves to cope with peak demand for heating and electricity in winter. Adequate reserves can also act as a buffer, allowing gas to be transported across borders within the EU to ensure that all member states have sufficient supplies. If the crisis escalates, countries can help each other.

“The key potential risk for Europe going forward is a fragmented energy market in the event of a complete disruption of Russian supplies,” said Simone Tagliapietra, a researcher at Brussels think tank Bruegel.

The European Commission has called on member states to update their emergency plans. According to Simson, greater energy conservation efforts must be a priority because there is not enough natural gas in the world to fully replace Russian supplies if Putin chooses to cut them all. Plans for coordinated demand cuts next month will provide guidance to governments on which sectors' supply cuts would have cross-border effects within the EU or even affect global supply chains.

“There is a possibility of rationing gas,” Habeck said ahead of the meeting. “A supply crisis in one member state will lead to an economic crisis in another. We all have obligations and rely on solidarity.”

The European Commission's forecast shows that although under current circumstances, the filling rate of natural gas reserves is expected to reach 90% by November 1, the Russian supply cut will reduce this level to below 75%.

“In order to achieve the restocking targets, intervention will need to be stepped up,” Tagliapietra said. “In this case, some EU countries may activate emergency plans to further reduce demand and allocate available gas between countries.”

From Global Market Report