Story
UK Natural Gas Set for Third Monthly Gain as European Prices Rise
Summary
European and British wholesale natural gas prices climbed on Wednesday, driven by Middle East tensions and winter supply worries. The UK contract is on course for its third straight monthly advance, highlighting diverging market dynamics.
European and British wholesale natural gas prices extended gains on Wednesday, pushed higher by persistent geopolitical friction and ongoing concerns about supply levels ahead of the winter heating season.
Market Moves
The benchmark Dutch front-month contract, a key indicator for European gas prices, rose 1.1% to 73.33 euros per megawatt-hour (MWh). In Great Britain, the day-ahead wholesale gas contract saw a more significant increase, climbing 3.5% to 187.24 pence per therm.
UK and EU Markets Diverge
Wednesday's price action capped a month of contrasting performance between the two major European energy hubs. The divergence highlights differing local supply and demand dynamics.
Ad- The British wholesale gas contract was on track to close September up 7.3%, marking its third consecutive month of gains. This strength was attributed to robust demand from the power sector and elevated regional export flows, which tightened local supply.
- The continental Dutch benchmark, meanwhile, was set to finish the month largely unchanged after a volatile September influenced by shifts in global liquefied natural gas (LNG) flows and changing weather forecasts.
Winter Supply Concerns Persist
A firm risk premium continues to underpin European gas markets, fueled by geopolitical and fundamental supply factors. Ongoing tensions surrounding the Strait of Hormuz have kept Brent crude oil prices elevated above $106 a barrel, reinforcing fears of broader energy inflation.
Traders also remain focused on storage levels. European underground gas inventories are reportedly running approximately 12 percentage points below the levels recorded at the same time last year. This deficit leaves the market sensitive to potential supply disruptions and fierce competition for LNG cargoes from Asian buyers as the northern hemisphere winter approaches.
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