EU gas curves push higher as depleted reserves and ECB rate-hikes anchor prices

European and British wholesale natural gas prices have risen sharply on Wednesday, marking a resumption of the upward trend following a brief pause the previous day. Winter storage deficits and fresh warnings from European Central Bank (ECB) policymakers have kept energy markets on high alert. The benchmark Dutch TTF contract rose by 2.7% to around 82.00 euros per megawatt-hour (MWh), while Britain's equivalent NBP contract climbed 2.5% to 203.00 pence per therm, nearing multi-year peak levels.

European Union storage caverns are currently at 68% capacity, falling short of the five-year seasonal average by 16 percentage points, leaving energy reserves thin ahead of autumn. Utilities are now forced to top up reserves at near-record prices due to Persian Gulf transit disruptions limiting liquefied natural gas (LNG) shipments through the Strait of Hormuz.

The surge in natural gas prices is the primary driver of Eurozone inflation, prompting central bankers to issue direct warnings. The ECB's decision to raise its deposit facility rate by 25 basis points to 2.50% last Thursday has intensified concerns, with Governing Council member Peter Kazimir emphasizing that natural gas and electricity costs are now the top threat to the regional price outlook.

Inflation in the Eurozone has accelerated to 3.3% in August, driven by a 14.3% surge in energy components, and policymakers warn that the bank will take decisive action if energy shocks continue to push medium-term inflation above the 2% target. The rally in wholesale natural gas prices aligns with broader market caution as fixed-income and commodity desks await the Federal Reserve's rate decision later in the day, with expectations of further ECB tightening before the year's end.

Energy traders anticipate wholesale gas prices will remain underpinned by significant risk premia until global supply flows normalize.