European wholesale gas futures held near their highest levels since 2022 on Monday after a multi-month rally. ECB President Christine Lagarde warned that rising borrowing costs will make it harder for households and firms to absorb energy bills, while supply risks from the Middle East keep a floor under prices.
European wholesale natural gas futures paused near their highest levels since 2022 on Monday, consolidating after a multi-month bull run. Broader macro headwinds and surging euro zone borrowing costs checked spot buying momentum.
The Dutch front-month contract held virtually flat at 87.88 euros per megawatt-hour. In Great Britain, the NBP contract held steady around 217.20 pence per therm. The Dutch benchmark is up approximately 210% year-to-date, while the British equivalent has surged roughly 196%.
Lagarde flags the cost of tighter financial conditions
Speaking on Saturday, Lagarde said the recent sell-off in sovereign bond markets is driving up borrowing costs across the euro zone, tightening financial conditions and curtailing economic growth.
She warned that this tightening will make it significantly harder than the ECB had projected last month for European households and industrial firms to absorb higher fuel and power bills stemming from ongoing Middle East conflicts. The ECB is widely expected to deliver another rate hike in December, taking its policy rate to 2.75%, and elevated capital costs are expected to weigh on gas-fired industrial activity through the rest of the year.
Middle East supply risks limit downside
Tighter financial conditions are acting as a drag on economic output, but downside price discovery remains severely limited by long-term structural supply risks. Seaborne LNG deliveries through the Strait of Hormuz remain heavily constrained by maritime attacks and extended rerouting around Africa, keeping spot arrivals into European import terminals tight.
European Union underground gas storage also sits at under-filled levels compared with historical seasonal norms. That leaves the continent acutely vulnerable to sudden cold snaps as the winter drawdown begins.
Source: Investing.com
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