European Gas Jumps to 4-Year High as Winter Approaches

European natural gas prices jumped 2% at the opening of trading in Amsterdam on Monday, extending gains of 7% last week, amid growing concerns that the gas withdrawal season has begun with no sign of Qatari LNG flows returning anytime soon. The front-month contract price at the Dutch TTF gas hub, the benchmark for European gas trading, rose 2.1% to $107.40 (€95.73) per megawatt-hour early Monday, marking its highest level since 2022.

The current price is the highest since the autumn of 2022, when Europe faced its first winter without most Russian pipeline gas supplies, equivalent to more than $30 per million British thermal units. The TTF price rose 7% last week as several European Union countries began withdrawing gas from storage facilities as temperatures dropped. EU storage sites were only 74.62% full on October 25, according to data from Gas Infrastructure Europe, a level well below the five-year average of about 86% for this time of year.

European inventories currently stand at around 845 TWh, about 100 TWh below their level at this time last year, according to Ole Hansen, head of commodity strategy at Saxo Bank. Hansen said this deficit alone is equivalent to the energy carried by more than 80 large LNG tankers, highlighting the volume of additional imports needed to rebuild storage before winter.

The Middle East crisis has cut off most LNG flows from the Gulf, after Qatar was the world's second-largest exporter of LNG before the war with Iran. Qatari shipments have slowed significantly over the past seven months, leaving Europe and Asia in fierce competition for alternative spot supplies. LNG flows have not meaningfully recovered as Middle Eastern oil exports have, and upside risks to prices increase with every day LNG shipments do not cross the Strait of Hormuz.

What do these terms mean?

TTF: Gas trading hub in the Netherlands, its price is considered the main benchmark for gas prices in Europe.

Megawatt-hour: A unit for measuring the amount of energy, European gas is typically priced per megawatt-hour.

LNG: Natural gas cooled into a liquid for transport in tankers to distant markets without pipelines.

Strait of Hormuz: A narrow waterway connecting the Gulf to the Gulf of Oman, through which a large portion of oil and gas trade passes.