European Gas Storage Hits Seasonal Record Low as Cold Winter Could Renew Price Crisis

European natural gas prices have climbed to a nearly four-year high as EU storage levels fell to about 75%, the lowest for this time of year since records began in 2011. According to Sina Finance, the December-delivery Dutch TTF futures contract rose 4.9% on Friday to €102.78 per megawatt-hour ($115), after topping €100 on Wednesday. Trading Economics data show the contract gained about 36% this month and 256% this year. The last comparable price surge came in 2022, after Russia’s invasion of Ukraine triggered an unprecedented European gas crisis. TTF futures reached €139 per megawatt-hour on December 5, 2022, and briefly soared to €339 per megawatt-hour in August that year. Disruptions to shipping through the Strait of Hormuz hampered Europe’s efforts to replenish gas storage over the summer. BlackRock analysts wrote in an October 27 report that already-low inventories could leave European energy prices, which had risen 170% this year, vulnerable to further increases if winter is cold. Natural gas accounts for about one-sixth of the EU’s power generation. Peter Taylor, head of commodities strategy at Macquarie Group, said Europe is effectively betting on a warmer winter, an expectation linked to El Niño. He noted that years with El Niño have often brought severe cold snaps to the UK and continental Europe. Taylor said Europe would need a sufficiently warm winter to get through the season, while severe cold could intensify competition with Asia for gas supplies and put further upward pressure on prices. BlackRock said the impact of energy shocks is uneven, estimating that they have reduced European GDP by about 0.5%, compared with 0.1% in the United States, and that the gap could widen. Europe and much of Asia are more exposed to gas price shocks than the United States, which has domestic shale gas and LNG production.