Gas prices at 2-year highs - Supply uncertainty increases in European markets

European natural gas prices rose to a two-year high as colder temperatures emptied the region's storage facilities. Futures rose 5.4% to €58.75 per megawatt-hour. That's the highest level since February 2023.

Northwestern Europe is bracing for cold temperatures in the coming days, which could boost heating demand and boost the growth that has dominated the year so far. Higher fuel consumption risks further depleting reserves, which are already at their lowest level for this time of year since the energy crisis in 2022.

Cold, windless conditions across Europe have increased gas consumption this winter and reduced renewable production. Inventories are only 49% full compared to 67% at the same time last year, making it more difficult to replenish them during the warmer months. “The risk of the European Union entering spring with very low gas inventories has increased in the last two weeks. Not only has the first month increased, but a rise in calendar prices for 2026-2027 is also expected,” the analysts point out.

Meanwhile, traders are set to gather in Germany this week to discuss market developments. In addition to the weather, they are closely watching the impact of US tariffs and potential retaliation, which risk making imports of liquefied natural gas more expensive.

European gas consumption is expected to rise 17% this month from a year earlier, driven by commercial and residential demand. Inventories are forecast to be 37% full by the end of winter. Traders are also rushing to hedge against rising European gas prices, signaling they expect further supply disruptions.