European Natural Gas Hovers Near Peak Levels

European natural gas prices have recently settled near their highest point since December 2022, reaching €98 per megawatt-hour on Thursday. This price surge, surpassing the €100 mark in the preceding session, is attributed to a combination of factors. The primary drivers include increasing heating demand, low gas reserves across Europe, and apprehensions surrounding a potential resurgence of conflict in the Middle East.

Over the course of the ongoing war, gas prices have more than tripled due to disruptions in shipments through the Strait of Hormuz, which halted liquefied natural gas (LNG) deliveries from key suppliers, predominantly Qatar. In response, the region has been compelled to seek alternative sources and has struggled to replenish storage capacities over the summer months.

As of October 28, European gas storage facilities were approximately 75% full, a level considerably lower than historical norms. Additionally, the forecast of colder weather in northwestern Europe in the upcoming days might spur higher heating demand, while forecasted cold spells in certain Asian regions could exacerbate competition for the limited available cargoes.