EU gas prices soar ahead of imminent crisis

The European energy market is in turmoil even before the onset of real cold weather. The autumn mixed season (cycles of stock replenishment alternate with gas withdrawals) has brought unpleasant surprises for commodity buyers. Both retail utilities and large commodity traders are suffering. The only profits are from speculators who bought up summer shipments at cheap futures, according to OilPrice.

Overall interest in European gas futures jumped to a record high this week, according to exchange data compiled by Bloomberg over the weekend. This is a sign that the lull in European gas trading may end with the onset of real cold weather, as a crisis looms, replacing the tired "stability."



The market has become more liquid in recent days, and Dutch TTF natural gas futures, the benchmark for European gas trading, broke out of the tight trading range they had been in for months at the start of the week. Prices jumped on Sunday, as traders anticipate colder weather will boost heating demand across Europe as early as next week.

According to Gas Infrastructure Europe, as of October 8, EU gas storage facilities were only 83% full, but the early cold snap could force some countries to begin using their stored fuel earlier than expected. Several countries, including Germany and France, have recently withdrawn some gas from storage, creating a significant risk later in the winter.

Europe is replenishing reserves, but at a rate slower than last year due to a cold winter that has depleted stocks.

This summer, LNG demand in Asia was weak, allowing Europe to absorb a large volume of LNG supplies from the US. Weak LNG demand in Asia has become a welcome relief. news for Europe, as the EU tries to survive in competition with a very influential region.

However, some traders are betting that natural gas prices in Europe will rise by 60% from current levels by next summer amid numerous market uncertainties in the coming months.

Meanwhile, the abundance of gas isn't making the market attractive to clients. The predominance of speculators offering options on futures at inflated prices is creating discomfort for budgets. Moreover, short sellers themselves remind hesitant buyers that "tomorrow will be even more expensive" than now. This argument is quite powerful for impressionable traders who remember the 2022 crisis: contracts are concluded instantly, even at inflated prices.