Supply risks and low inventories drive European natural gas prices higher
Ongoing supply risks and low pre-winter inventory levels in Europe are causing natural gas prices to hover near their highest levels since January 2023.
While supply risks and low inventory levels ahead of the winter season in Europe are driving up natural gas prices, benchmark futures contracts in the markets continue to maintain their high levels.
Price Movements in Futures Contracts
Benchmark futures contracts followed a volatile course, paring some of their gains after registering an increase of up to 4.3% today.
While prices remained near their highest intraday levels seen since January 2023, the October futures contract gained approximately 10% this week.
Geopolitical Developments and Market Impacts
As the US entered the second day of its airstrikes against Iran, US President Donald Trump ruled out the possibility of an agreement to end the conflict.
These geopolitical developments and ongoing disruptions directly threaten Europe's efforts to refill its gas inventories ahead of winter.
Analysts' Assessments and Outlook
Morningstar senior analyst Tancrede Fulop stated that they do not expect an energy crisis like the one in 2022, but noted that Europe remains structurally vulnerable to another gas shock.
Fulop projects that Europe's gas balance will remain tight next year and that prices are unlikely to normalize before 2028, when new global LNG supply comes online.
Critically Low Gas Inventories
Storage inventories across Europe are currently only 65% full.
This current rate points to the lowest seasonal level ever recorded in data dating back to 2009.
Import Demand and Reflections on the Asian Market
A BMI report stated that the need to refill inventories ahead of winter will strengthen import demand in Europe and cause the burden to shift from east to west.
This situation was among the points noted in the report as continuing to exert upward pressure on the Asian benchmark price.
Latest Status in the Netherlands and the Amsterdam Exchange
Europe's benchmark gas price, the Netherlands' front-month futures, increased by 1.7% per megawatt-hour during morning trading in Amsterdam.
With this increase, the futures contracts in question rose to 73.42 euros per megawatt-hour.