Traders have begun drawing on winter gas storage, pushing European natural gas prices higher, a sign that heating demand is picking up and adding further strain to already low inventories.
Benchmark futures rose for a second straight day, driven by Europe's fragile supply balance and higher oil prices. This week, countries including Germany and France have started withdrawing gas from storage.
The latest data from Gas Infrastructure Europe shows that overall EU storage levels declined on Tuesday for the first time this winter.
Although temperatures across much of Europe were mild in October and the first withdrawal from storage came nearly three weeks later than last year, Europe is about to enter the peak heating season with a significantly smaller buffer.
EU storage facilities are less than 75% full, the lowest for this time of year since records began in 2009. In Germany, the bloc's largest economy, the storage rate is only slightly above 61%.
Ongoing conflict in the Middle East continues to disrupt global energy supplies.
Low storage levels have increased Europe's reliance on flexible LNG cargoes, and in a tight supply environment, buyers may be forced to bid up prices to secure adequate volumes.
Earlier this week, European gas prices touched their highest level since late 2022, nearly tripling compared with last winter. Although still far below the peak of the previous energy crisis, the current price surge is already putting pressure on households and industrial users.
Mild weather earlier this month gave European energy companies some breathing room, allowing them to replenish inventories in October at a faster pace than usual. Most forecasts show that northwestern Europe will see unusually warm weather again next week.
But as temperatures decline in November, gas heating demand will rise, and the scale of withdrawals from storage will also increase. If inventories are drawn down quickly this winter, more gas will be needed to refill them next summer.
Factoring in supply risks such as the ongoing Middle East conflict and delays to new LNG projects, the May 2027 contract is trading above the November 2026 contract, with the spread hitting a record high this month.
In the near term, traders continue to monitor the situation in the Strait of Hormuz, where attacks on oil and gas vessels by Iran have increased recently.
Meanwhile, French President Emmanuel Macron said on Wednesday that France will receive LNG from Qatar this winter. He said France is improving security guarantees for some tankers but did not provide further details.
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