Natural gas prices in Europe reached nearly 90 euros per megawatt hour (equivalent to $29.50 per million British thermal units) on Thursday. This price increase is attributed to escalating tensions in the Middle East and concerns over gas supply in the upcoming winter, especially considering historically low reserves.
Price Increase in the Gas Market
The gas price at the Title Transfer Facility (TTF) in the Netherlands, recognized as the reference for gas trading in Europe, experienced a 2.7% increase at 9 AM Amsterdam time. This price increase coincided with a 3% rise in crude oil prices. Tensions in the Middle East, particularly the conflict between Saudi Arabia and the Houthis, as well as Iran's announcement of attacks on several oil tankers in the Persian Gulf, are factors influencing these price fluctuations.
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Gas Reserves and Potential Risks
The current gas price in Europe has reached 89.76 euros per megawatt hour, marking the highest level since December 2022, when Europe experienced its first winter without the majority of gas supply through Russian pipelines. According to recent data, EU gas reserves were only 74% full as of October 21, significantly below the five-year average of about 86% for this time of year.
Analysts warn that prices may sharply increase given forecasts of a cold winter in Europe and Asia, or if any further supply disruptions occur. In the early hours of Thursday, Brent crude oil prices reached $112 per barrel, the highest level in the past five months, raising concerns about further supply disruptions from the Middle East.
Ole Hansen, head of commodity strategy at Saxo Bank, emphasized in a note: "European natural gas faces similar risks, and relatively low storage levels make the region heavily dependent on imports during the winter." He also added: "A prolonged cold spell, coupled with renewed disruptions in LNG transportation, could lead to a sharp increase in prices from current levels."
Analysts at the consultancy Timera Energy also indicated in their winter forecast report that, given low reserves and dependence on imports, there is a risk of price increases late in the winter. They predicted that if the current situation in the Strait of Hormuz continues, prices will be significantly affected.
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