European gas futures climbed to their highest levels since 2022 on Tuesday. Norwegian supply outages, constrained shipping through the Strait of Hormuz and low storage all pushed prices up. Colder weather forecasts added to the pressure.
The benchmark Dutch front-month contract jumped over 2% to trade at 86.00 euros per megawatt-hour (MWh), its highest price in nearly four years. The Financial Times reported that Dutch TTF futures hit €86.50 per megawatt hour, rising for a sixth day. In Great Britain, the equivalent contract broke through 215.00 pence per therm, matching its highest level since the 2022 energy crisis.
Norwegian outages tighten supply
Norwegian pipeline operator Gassco reported an unplanned outage at the Kårstø gas processing plant, cutting export capacity to Western Europe. Gassco also confirmed that additional unplanned maintenance across key offshore fields would further limit pipeline deliveries.
Meanwhile, the conflict involving Iran continues to constrain shipping through the Strait of Hormuz, a chokepoint for seaborne liquefied natural gas. Typically, around a fifth of the world's liquefied natural gas travels from the Gulf through the strait. Carriers face longer reroutings around Africa, and European regasification terminals are struggling to offset lost pipeline imports, Investing.com reported.
Low storage leaves Europe exposed
European Union underground storage sits at just 73% capacity, below historical averages for mid-October. The FT put the figure at less than 74%, against normal levels of about 90% for this time of year.
Ole Hansen, head of commodity strategy at Saxo Bank, said low storage at the start of winter demand has left Europe vulnerable. According to the FT: "Unfortunately, it only took a small drop in temperature to lift prices".
Cold forecasts and the Ukraine diesel dispute
Colder than usual temperatures, particularly in central Europe, are expected to push gas demand higher this month. The forecast cold snap is expected to coincide with low wind speeds, which would curtail wind power production.
The FT also tied the rally to a stand-off between Donald Trump and Volodymyr Zelenskyy over Russian diesel. European prices have risen from about €32 per MWh on the eve of the Iran war, a rise of 170%, their highest since the aftermath of Russia's 2022 invasion of Ukraine.
Sources: Investing.com, Financial Times
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