Worries over Europe's fragile supply-demand balance this winter and the outlook for conflict in the Middle East have intensified, pushing European natural gas prices above 97 euros per megawatt-hour for the first time since 2022.
In early trading on Monday, benchmark futures extended last week's gains, rising as much as 3.5%.
Temperatures across Europe are set to fall, and traders expect heating demand to rise over the coming days. Combined with tight global gas supply, Europe may end up competing on price with other buyers such as Asia.
Persistent conflict and supply disruptions in the Persian Gulf are steadily cooling market expectations for any near-term easing.
According to reports, the United States is set to launch a new round of airstrikes against Iran around the November midterm elections, and Iran is preparing to carry out retaliation in multiple locations across the Middle East.
Since the 2022 energy crisis, volatile liquefied natural gas supply has been a key source of energy for Europe. Europe is now entering its peak demand season with inventories at unusually low levels, leaving it highly vulnerable to supply disruptions. The fill rate of EU gas storage facilities stands at about 75%, the lowest for this time of year since records began in 2009; Germany's storage fill rate is only slightly above 61%.
European gas prices remain far below the peak of the previous energy crisis, but this rally carries the risk of pushing up inflation and weighing on economic activity.
So far in October, Europe's LNG imports have fallen short of the same period last year, even though imports usually surge sharply at this time of year.
Comments