European natural gas prices rose on Monday, driven by concerns over supply risks from geopolitical tensions in the Middle East and Ukraine, as well as colder weather forecasts. The Dutch TTF Natural Gas Futures, which serve as the benchmark for European gas trading, saw a 2.35% increase, trading at $39.20 per megawatt-hour.
The uptick in prices follows a 3.4% decline last week, as traders reassess potential disruptions to gas supply ahead of the winter season.
Key risks to the gas supply stem from the conflicts in Ukraine and Russia, particularly in the Kursk region where the Sudzha gas metering station, crucial for transporting Russian gas to Europe, is located.
Despite European gas storage being over 93% full, according to Gas Infrastructure Europe, this is not sufficient to meet all of Europe’s energy needs for the winter. As a result, traders are paying close attention to the ongoing conflict, which poses a threat to steady gas supplies.
European Natural Gas Prices Climb Amid Geopolitical Tensions and Colder Weather Predictions
In addition to the Ukraine-Russia tensions, the looming expiration of a gas transit deal between Russia and Ukraine by the end of the year adds further uncertainty. Ukraine has indicated it will not negotiate an extension to this agreement, potentially disrupting the flow of Russian gas to Europe. Meanwhile, in the Middle East, rising tensions between Israel and Hezbollah in Lebanon pose a risk to natural gas fields offshore Israel, which provide supply to several countries, including Egypt and Jordan.
Supply issues are also being exacerbated by maintenance delays in Norway. The Skarv and Sleipner gas facilities have extended their maintenance schedules, slightly reducing the flow of Norwegian gas to Europe. This comes at a time when European markets are already cautious about maintaining a stable energy supply amid various geopolitical threats.
Finally, colder weather forecasts for parts of Europe by the end of the week could increase demand for heating and power generation, further tightening the natural gas market. As temperatures drop, the combination of heightened demand and potential supply disruptions is likely to keep European gas prices volatile in the coming weeks.
