IEA Issues Warning on Gas Market Tightness Extending Into 2027
(Bloomberg) — Tightness in the world’s natural gas market could extend well into next year as Europe risks ending this winter with record-low fuel inventories and will need to replenish them, according to the International Energy Agency.
Low gas storage levels across the European Union, coupled with continued supply disruptions in the Middle East, mean that the region will drain its reserves heavily over the cold months, the IEA said in a report Tuesday.
“EU storage sites could close the 2026/27 heating season with record low inventories,” it said. That would “substantially increase the need for injections through summer 2027, potentially extending market tightness into the following year.”
Europe’s economies have struggled with gas prices near their highest levels since the energy crisis erupted four years ago. Even though the continent is just starting its peak-demand winter season, next year’s risks are already spreading into 2027 futures contracts as traders hedge against further price increases.
Europe’s next May contracts have been trading above those for November 2027 as the market weighs risks to supply, including continued hostilities in the Middle East and potential delays to new gas projects. The spread reached a record high in recent days.
IEA’s simulations show that EU gas storage levels could drop below 10% of working capacity — a record low — by the end of March, “assuming a worst case” of continued disruption to LNG flows via the crucial Strait of Hormuz and colder weather. This would leave the European market exposed to late cold spells, the IEA said, meaning even more price volatility by the end of the heating season.
The Paris-based agency expects the market to remain tight even though new LNG capacities are coming online next year and global demand for the fuel is expected to drop in 2026, including by 3% in Europe. The continent’s factories are forecast to cut gas consumption by 5% given elevated price levels — in addition to the continued expansion of renewables across Europe.
The IEA report estimates that trade flows through the Strait of Hormuz will remain largely disrupted, at least until the end of the year. Under this assumption, global LNG supply is projected to decline by 3% this year, the steepest annual decline on record.
©2026 Bloomberg L.P.
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