Europe’s Energy Winter Looms: Two U.S. LNG Stocks Positioned to Benefit

POWER POINT

What I’m hearing from energy insiders

Oil flows through the Strait of Hormuz are increasing, with more vessels transiting safely and prices retreating—at least temporarily. Goldman Sachs reported Wednesday that Persian Gulf exports have rebounded to their 2025 average following a September doubling. The investment bank forecasts Brent crude will moderate to $85 per barrel by year-end. This is positive for the oil market and potentially beneficial for both the United States and China.

My take → I understand the appeal of the phrase “reopen the Strait of Hormuz,” but I cannot endorse it. Hormuz is an international waterway; no single nation possesses the authority to “close” it. While Iran—or the Houthis in Yemen—can threaten shipping in Hormuz or the Red Sea, raising transit risks, no country holds the power to open or close a public international waterway. I recognize I am the outlier here, and I prefer it that way.

The less favorable news concerns natural gas and Europe. Despite the oil market’s stabilization, Germany and much of Europe may face a long, costly winter.

For five years, I have tracked the continent’s persistent energy struggles: the growing number of U.K. households forced to choose between heating and eating, known as energy poverty; rising electricity costs eroding industrial competitiveness; and the emergence of American liquefied natural gas (LNG) as a vital “Marshall Plan for energy” ensuring European lights stay on.

One recurring concern was the risk of critical natural gas shortfalls during the year. Fortunately, those forecasts did not materialize. Worst-case scenarios were avoided, largely thanks to weather. Europe has benefited from several years of mild conditions, allowing nations to conserve natural gas storage.

Not anymore.

Western Europe shattered its 2003 heat record this summer. Although air conditioning penetration lags behind the U.S., usage is becoming increasingly common. High temperatures drive demand from businesses and consumers alike, and A/C is a significant power drain. As electricity demand spiked, natural gas inventories were depleted.

The Swiss Federal Office of Energy monitors gas storage against a five-year average. The chart below illustrates that EU storage levels now sit at their lowest point in that period.

As visible here, Germany faces slightly more precarious conditions. France, though not depicted, is in a similar position.

Despite lower storage and higher costs, European officials appear unconcerned. A coalition representative group noted that despite storage levels below historical norms, the Commission and EU nations reconfirmed that gas supply remains stable.

I have two additions.

One: Stability depends entirely on American exports. U.S. firms are averting a far worse energy crisis for the continent. This is not exaggeration. Gas liquefied and loaded in Texas, Louisiana, and other ports determines whether Europe has “stable” supplies or struggles to meet demand. Disruptions to Qatari gas have increased Europe’s reliance on LNG from the U.S. and, notably, Russia.

It is difficult to believe, but Europe continues purchasing billions of dollars in Russian natural gas, shipped by sea rather than via the now-destroyed Nord Stream pipeline. My producer, Harriet Taylor, and I watched with disbelief as cargoes of Russian gas arrived at the Port of Rotterdam. Many assume Moscow earns nothing from Europe’s energy needs now that Nord Stream is gone. That assumption is incorrect.

European leaders insist they will eliminate Russian LNG by January 1 and terminate all Russian gas contracts by late next year. I remain skeptical. Given public anger over electricity or heating failures, Russia will likely continue selling gas to Europe well beyond these optimistic announcements. Time will tell.

Two: It is not merely about supply; it is about price. On the ICE exchange, October futures for European natural gas trade at more than double the price of February contracts. Although many utilities have hedged costs, those buying on the open market face the dual shock of elevated gas prices and higher shipping fees. For spot cargoes, Europe competes with Asian buyers, both ready to pay premium prices to maintain power and heat this winter.

The silver lining is recent price declines, fueled by hopes for a lasting peace deal enabling safe Hormuz shipping. Peace in the Middle East would be a favorable outcome on multiple fronts.

Another help would be another mild winter, reducing heat demand and gas consumption. This would preserve storage levels and give utilities a head start refilling inventories for next year.

Much of that supply originates in the United States, which produces more gas than it can currently export. For investors, two clear names are exporters Cheniere Energy (LNG) and Venture Global (VG). Less obvious: the largest holders of U.S. LNG capacity are French and British firms, TotalEnergies (TTE) and Shell (SHEL).

TotalEnergies CEO Patrick Pouyanné — arguably the most important CEO in global oil and gas — spoke with us this week about Europe’s energy challenges, prices, and more in a Power Insider interview.

Thanks for reading and watching,
Brian

ACTIONABLE INSIDER

Speaking of TotalEnergies, it is time to buy that stock — and BP, too. So says the team at HSBC.

HSBC is upgrading both BP (BP) and TotalEnergies to buy. Higher natural gas prices play a part in the call. The firm raised its TTM European natural gas price forecast — what we showed you above — by 34% for the rest of this year and 40% for next year, while also slightly raising its 2028 outlook. Analyst Kim Fustier also sees “substantial upgrades” across both firms’ oil and refining-margin outlooks, as well as huge cash generation and stock buybacks.

BP and TotalEnergies are not the only energy stocks the firm loves. It maintains its buy ratings on Shell (SHEL), Spain’s Repsol (REP-DE), and Chevron (CVX). Fustier sees about 20% upside for her Buy-rated stocks.

I think it is a fascinating call, in part because Fustier acknowledges that the situation around Hormuz may not improve rapidly anytime soon. HSBC’s base case is that the situation is prone to “repeated breakdowns” and “continued uncertainty,” though it does see shipping volumes continuing to improve.

HSBC isn’t the only firm getting hotter on BP these days.

JPMorgan also just upgraded BP to overweight. In a note titled “Road to Redemption,” the firm says a return to the “value of simplification” and “renewed long-term growth” look good for BP investors. While the firm notes that BP’s recent history has been beset by operational and strategic issues, it sees the company getting things right under new-ish CEO Meg O’Neill.

Insider → Also, get to know some new geography. JPMorgan highlights how BP’s discovery in Bumerangue may be a big deal. Bumerangue is a big Brazilian offshore oil block. It’s BP’s largest discovery in 25 years, according to Wood Mackenzie. I had never heard of it before reading this note.

I agree that BP is a company to watch closely over the next 12-24 months. The company made a hard pivot away from its core competency – oil and gas. The company once known as British Petroleum even went so far as to make an ill-fated rebranding effort to be known as “beyond petroleum.” That didn’t last long. While the company remains a player in solar and battery technologies and has a joint venture in wind power, it is refocusing back on what originally made it one of the world’s biggest companies.

BP investors are also desperate for some consistency in leadership, and should have found that in new-ish CEO Meg O’Neill. O’Neill is a super smart veteran of the industry. She came to BP from Woodside Petroleum and before that was the CFO of ExxonMobil. She knows the industry and how to compete on a global scale. The big question any BP investor should be asking is: is it too late to really effect the kind of change investors are looking for? My take is that it is not, but BP will have to act fast. Oil itself may take eons to create, but the industry never stops. O’Neill needs her foot on the gas pedal.

TAKE A LOOK

This week’s Take A Look is a conversation with energy executive David Crane. He’s currently the CEO of Generate Capital, and previously served as CEO of NRG and as an energy official in the Biden White House. It was great to sit down with David for a longer conversation about power, energy, nuclear, and why he believes the stock market is making a mistake with some energy-related names.

INSIDE LINE

This week’s Inside Line is with TerraFlow Energy CEO Jon Parrella. TerraFlow is building out battery and storage technologies and just signed an agreement around data centers.

RANDOM, BUT INTERESTING

You know things are getting hot when the world of energy partners up with NBA basketball! That’s exactly what just happened as Bloom Energy strikes a multiyear deal to place its name on the Philadelphia 76ers’ jersey. With the arrival of superstar LeBron James to Philly this year, we’ll see if this deal is a… slam dunk.

LeBron James #23 of the Philadelphia 76ers poses for a portrait during media day at the Philadelphia 76ers Training Complex on September 28, 2026 in Camden, New Jersey.

Emilee Chinn | Getty Images

THE GRID

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