Europe's gas bust

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Power Up

Power Up

A Reuters Open Interest newsletter

By Gavin Maguire, ROI Global Energy Transition Columnist
 

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Hello Power Up readers,

The situation around the Strait of Hormuz may be entering a new phase after Iran and the U.S. both made competing claims over who controls the vital waterway within hours of each other. 

One day after U.S. President Donald Trump declared that the United States had "total control" of the Strait, the new head of Iran's Basij Paramilitary unit announced that the Strait is "under the management and control of the Islamic Republic."

So what should we expect next? More threats of escalated attacks? More promises of imminent peace talks? Probably a bit of both.

In addition to the impasse in the Gulf, oil markets are still digesting a double whammy of key recent oil market releases: a downbeat assessment of the state of demand by OPEC - which lowered its oil demand growth forecast for the fourth straight month - and projections for a deepening oil supply shortfall from the International Energy Agency. 

Oil prices are still trying to decide what to make of it all, and are trading around 2% to 3% lower so far on Thursday.

Natural gas prices have taken on a more bullish posture, pressing higher in Europe on the assumption that a durable peace deal is still a way off. European gas market sentiment is also being underpinned by another heatwave, which is curbing regional nuclear power output, and by below-average natural gas inventories.

But given the combination of rapid supply growth of renewables  and reduced use of gas by power producers, does Europe need as much gas on hand as it used to? I dig into that question more deeply below. 

Up first, though, some other key articles and columns to check out:

  • Six decades after Fidel Castro's revolution, all of a sudden, capitalist cracks are appearing in Cuba's communist energy sector.
  • Just how much crude oil is leaving the Strait of Hormuz, asks ROI's Clyde Russell. U.S. Energy Secretary Chris Wright claims almost nine million barrels per day, but the companies that track vessel movements say at best it is about half this volume.
  • Top U.S. fuel makers boosted returns to shareholders in the second quarter as prolonged disruptions to crude supplies through the Strait of Hormuz sent fuel prices and refining margins surging.
  • China's coal imports surged to the highest this year in July, but the strength is deceiving and built on short-term factors that are unlikely to persist, argues ROI's Clyde Russell.
  • As the U.S.-Iran war drags on with no end in sight, oil traders and policymakers are grappling with a critical question: are global oil stocks enough to offset what could become the biggest supply disruption on record?

As always, don't hesitate to contact me at gavin.maguire@reuters.com or follow me on LinkedIn with any questions or thoughts.

 
 

Top energy headlines

  • Oil falls more than 3% on weaker global demand outlook and US crude buildup
  • Are global oil stocks big enough to weather another six months of US-Iran war?
  • ADNOC unbound: War, OPEC exit launch Emirates oil giant on quest for growth
  • Salvors work to secure ship leaking oil off Oman, risk firm Ambrey says
  • Diesel prices overtake jet fuel in Europe as global shortage widens
 
 

Europe's solar boom becomes a gas bust

The defining question of Europe's energy story over the past few years has been whether the region has enough gas. That query is starting to look outdated. 

Following Russia's invasion of Ukraine, policymakers, utilities and traders became fixated on storage levels, LNG cargo arrivals and winter weather forecasts. Gas inventories became the key measure of Europe's energy security.

But a new trend emerging across the continent's power system suggests Europe may increasingly be asking the wrong question.

The issue is no longer whether Europe can secure enough gas supplies. It is whether Europe still needs as much gas as it once did.

Combined electricity generation from Europe's wind and solar farms is on track to exceed output from gas-fired power plants for the longest stretch on record in 2026. 

That may sound like just another clean-energy milestone. In reality, it could mark a structural shift in Europe's gas market.

Check out the full column below for more.

Read the full column