That leaves Europe increasingly dependent on a factor it cannot control: the weather.
A mild winter could provide enough breathing room to avoid a full-blown crisis. But a prolonged cold spell that sharply increases heating demand would expose just how little margin for error remains in Europe's energy system. After years of successive shocks, the continent once again finds itself one harsh winter away from a serious energy crunch.
(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.)
Diesel inventories fall to multi-year lows
THE DIESEL DEVIL
Europe faces similar challenges in diesel, a market that has quietly become one of the most acute areas of energy stress this year.
The region is heavily dependent on diesel imports, and the fuel plays a dual role in Europe's economy, powering transportation and industry while also serving as the feedstock for heating oil. Consumers and fuel distributors typically build inventories during the summer months to prepare for colder weather.
Instead, inventories have been shrinking.
The Iran war has disrupted important Middle Eastern supply routes and reduced diesel exports. The loss of those barrels has forced consumers to draw down stocks, pushing inventories to multi-year lows.
European diesel inventories are at their thinnest level since 2022. Additionally, stocks in the United States, the world's largest diesel exporter, fell in May to a 23-year low before recovering by around 10% in the week ending July 17, according to the U.S. Energy Information Administration.
The situation has been compounded by policy decisions in two of the world's biggest fuel exporters.
China has restricted fuel exports since the outbreak of the Iran war as it seeks to conserve supplies. How it plans to manage its production and exports moving forward remains a huge unknown.
Meanwhile, Russia — the world's second-largest diesel exporter in 2025 — moved to ban diesel exports in July after relentless Ukrainian drone attacks damaged some of its refining facilities and reduced domestic fuel availability.
Russia had been shipping nearly 1 million barrels per day, or around 12% of global diesel exports, before the recent escalation in the war with Ukraine.
The result of the ban has been an extraordinary surge in refining margins. European diesel crack spreads recently climbed to a record of nearly $65 per barrel.
Unsurprisingly, those high prices are beginning to curb demand.
Diesel demand in Europe dropped by over 6% in April to 5.53 million bpd, according to the International Energy Agency. Some of the decline may reflect the continued shift toward gasoline-powered and electric vehicles, but persistently elevated prices are also forcing consumers and businesses to cut consumption.
Even if tensions in the Middle East ease quickly, the damage to inventories has already been done. Global LNG and diesel markets are likely to remain undersupplied for months as countries rebuild stocks and compete for limited supplies.
LNG imports lag as Asia draws cargoes away
MIDEAST LNG CRUNCH
Europe is falling behind the pace needed to replenish its LNG inventories before winter. Underground gas storage facilities are currently around 55% full, their lowest level for this time of year since 2021, according to LSEG data.
At the same time, LNG imports into Europe have slowed sharply since the outbreak of the Iran war. Imports are on track to total just 6.3 million metric tons in July, the lowest since September 2024, according to Kpler.
Part of the reason is that Asia has returned to the market with force. LNG demand across the region has climbed in recent months, attracting a record 4 million tons of U.S. supply in June and July, according to Kpler. Those purchases have diverted cargoes that might otherwise have headed for Europe.
When the Strait of Hormuz briefly opened following the U.S.-Iran interim peace deal in April, many hoped that Qatar — which accounted for around a fifth of global LNG supply before the conflict — would quickly restore exports. But the renewed blockade of the strait in recent weeks amid escalating U.S.-Iran tensions has dashed any hopes of that.
The European market is thus becoming increasingly alarmed by the combination of low inventories, weak imports and a deteriorating supply outlook. Benchmark European gas prices rose above €60 per megawatt hour last week, climbing above their previous Iran war peak to their highest level since early 2023.
Higher prices should eventually attract additional LNG cargoes to Europe. Yet even if imports recover during the coming months, the region appears likely to enter winter with gas inventories well below its targeted 80% storage level.
Europe enters winter with fragile gas supplies
LONDON, July 27 (Reuters) - Europe is heading into winter with alarmingly fragile energy supplies as the conflicts in the Middle East and Russia tighten global markets for liquefied natural gas and heating oil, pushing inventories to dangerously low levels.
Natural gas and heating oil are Europe's primary sources of residential heating, with gas accounting for around 30% of household heating demand and oil accounting for roughly 10%, according to official data. After successive years of energy shocks, Europe looks set to enter another winter with both fuel markets under severe strain.
The region's gas vulnerability is in large part a consequence of the dramatic transformation of its energy mix since Russia's full-scale invasion of Ukraine in 2022. Europe rapidly replaced Russian pipeline gas with LNG, becoming one of the world's largest importers of the super-chilled fuel.
That shift improved Europe’s energy security by reducing reliance on Russia, but also complicated the region’s energy dynamics. Rather than relying on long-term pipeline flows, Europe now competes with Asia and other regions in a global LNG market where supply disruptions can reverberate around the world almost instantly.
That vulnerability has become increasingly apparent in recent months.
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