Europe is encountering escalating competition from Asia for its limited natural gas supplies, as national reserves decline and demand surges during the summer months when reserves are typically replenished. Analysts and officials cited by Politico warn that this competition may prove difficult for the European Union to navigate.
Centralized Asian economies like China, Vietnam, and South Korea are better positioned to negotiate spot market gas purchase agreements, placing Europe, which is focused on the free market, at a disadvantage.
After Russia’s invasion of Ukraine, the EU gained the authority to coordinate collective energy purchases. However, this policy has not yielded significant results. Consequently, even if the peace agreement between the United States and Iran holds, Europe may still face higher gas and electricity prices in the coming months.
“We are in for a period of tension,” stated Patrick Pouyanné, CEO of TotalEnergies, before French lawmakers earlier this week. He noted that the EU could face challenges if it does not quickly resume supplies from Qatar. “I don’t see prices returning to 2022 levels, but I also don’t expect them to drop as they did for fuel,” he added.
According to EU regulations, member states must replenish their gas reserves to at least 80% of national capacity by December. Typically, this is accomplished in the summer when demand and prices are lower. Energy traders usually capitalize on these lower prices to buy and store gas in summer, then sell it at a profit in winter when demand and prices rise.
However, this summer, elevated prices have disrupted that incentive, leaving the bloc’s storage levels below the five-year average.
Why Asia is Pressuring Europe’s Natural Gas Reserves
Developments in Asia could exacerbate the situation. Analysts warn that hotter summers in Asia will increase air conditioning usage, driving gas demand higher.
Asian countries primarily rely on long-term supply contracts; however, growing demand and declining reserves may increasingly push them toward the spot market, where prices fluctuate daily and tend to rise sharply with surging demand. This would place Asian countries in direct competition with Europe, which has heavily relied on the spot market this year to secure its supply.
If rising demand from Asia coincides with panic buying at the end of summer in Europe, it could trigger a transcontinental competition for gas shipments. Tobias Federico, chief analyst at Montel Energy, suggests that the EU may need to outbid Asian offers on the spot market to meet its storage targets.
According to ACER, the EU’s energy agency, achieving these targets this year might require up to a 13% increase in LNG imports compared to 2025, a challenging goal under current conditions, especially if production in the Persian Gulf does not rebound.
All of this could reignite pressure on gas prices, forcing additional withdrawals that would deplete European reserves.
“We could see more desperate LNG purchases tightening global markets – in which case, Europe may simply concede in its efforts to replenish gas stocks and postpone the issue until winter,” remarked Seb Kennedy, founder of the analysis firm Energy Flux.
EU’s Partial Solution Attempt After Russian Invasion
Following Russia’s invasion of Ukraine in 2022, the EU sought to create a platform – AggregateEU – to allow private companies to negotiate better gas deals collectively on the international market.
While this initiative gained popularity among smaller importers with limited resources, there is no transparency regarding the number of transactions conducted through the platform. Major players generally avoided it, preferring to act individually.
“Although several negotiations were initiated, they did not materialize into completed transactions,” said Christoph Gottstein, head of communications at the German energy giant SEFE. “This experience reinforces our assessment that the gas market has continued to operate efficiently… without the need for intervention,” he added.
The gas procurement coordination platform has since been dismantled, but the European Commission has considered reviving it following the war in Iran. However, diplomatic sources indicate that the EU can do little to compel companies to use these platforms effectively.
“Everyone for Themselves”
According to an official who commented on the situation under anonymity, importers are also concerned that coordination through a platform could be seen as a form of anti-competitive practice, and the Commission itself can only help companies informally ensure they do not violate complex competition rules.
Moreover, European officials cannot negotiate directly with competitors. While the Commission and Asian governments have exchanged information about energy policies to avoid market destabilization since the onset of the war, officials cannot negotiate about the destination of individual shipments.
“Everyone for themselves,” emphasized another official who spoke to Politico under the condition of anonymity. This suggests that Asian countries may have an advantage over Europe. “In crisis situations, more centralized markets can tell a few companies: ‘Just get it done,’” said another EU official. “We can coordinate, we can encourage, but we cannot operate in the way China does,” the source noted.
