European Natural Gas Prices Hit Nearly Four-Year High on Mideast Tensions, Low Storage

European wholesale natural gas prices advanced for a fourth consecutive session on Monday, with the continental benchmark hitting its highest level in nearly four years. The surge reflects mounting market anxiety over persistent supply risks from the Middle East and historically low inventories as the region heads into its peak winter demand period.

Prices Reach Multi-Year Peaks

The front-month Dutch TTF contract, Europe's benchmark for natural gas, rose 3.6% to €97.19 per megawatt-hour (MWh), a level not seen in almost four years. In the United Kingdom, the equivalent NBP natural gas futures contract climbed 3.7% to 239.33 pence per therm.

This upward momentum follows a significant rally last week, where Dutch contracts gained nearly 7% and British gas rose over 6%. The sustained price increases underscore the fragility of the continent's energy markets.

Supply Squeeze Intensifies

Two primary factors are fueling the rally: geopolitical tensions and depleted inventories.

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• Geopolitical Risk: The market remains on edge following recent Houthi drone and missile strikes on Saudi energy facilities. These events have created transit bottlenecks for maritime energy flows through the Persian Gulf and the Strait of Hormuz, curbing tanker operations.
• LNG Deficit: As a result of mandatory vessel reroutings around the Cape of Good Hope, deliveries of Liquefied Natural Gas (LNG) from the Middle East to Europe are reportedly running approximately 80% below year-ago levels. This has created a structural deficit for European import terminals.
• Low Inventories: Compounding the supply issue, European Union underground gas storage sites are at roughly 74.6% capacity—the lowest seasonal level for late October recorded since 2009. With colder temperatures arriving, some member states have already begun withdrawals, shrinking the inventory buffer that would normally cushion against price shocks.

Economic Implications

The sharp rise in energy costs is reigniting concerns about inflation across the eurozone and the United Kingdom. While the European Central Bank and the Bank of England are expected to hold interest rates steady in their next meetings, the persistence of high energy prices poses a significant challenge.

According to the source, money markets have begun pricing in the possibility of follow-up 25-basis-point rate hikes by both central banks before the end of the year. Policymakers face the difficult task of managing these energy-driven, second-round price pressures without stifling economic activity.