European natural gas prices for summer delivery have climbed to a premium over winter contracts, driven by concerns about securing sufficient storage and recent supply disruptions, Bloomberg reports.
This unusual price dynamic, with summer gas currently around €4 per megawatt-hour more expensive than winter gas, signals growing anxieties about energy security across the continent.
The price inversion has been escalating since late last year, fueled by worries about supply risks for 2025. Now, the spread has widened further after Germany signaled it may subsidize the refilling of its gas storage facilities. Trading Hub Europe, the country’s natural-gas market manager, is in talks with regulators regarding a potential subsidy, raising the prospect that higher summer prices will be paid to ensure adequate stockpiles.
This potential intervention has ignited concerns that the price differential could discourage traders from building up reserves during the warmer months, a practice crucial for mitigating demand spikes in the winter. Since losing most of its Russian pipeline gas, Europe has become increasingly reliant on robust gas storage to bolster its energy security.
Adding to the bullish sentiment, a severe winter storm in the US is disrupting natural gas shipments from the Freeport LNG export facility in Texas, a major source of supply for Europe. The plant has experienced “intermittent” power outages, leading to its shutdown and widespread transportation disruptions.
Geopolitical uncertainties are also playing a role. Traders are closely watching for potential action from US President Donald Trump, who has suggested he may impose additional sanctions on Russia if President Vladimir Putin doesn’t engage in negotiations over Ukraine. The US has already imposed significant energy sanctions on Russia, including some LNG projects.
Low-wind conditions on Wednesday further compounded the situation, increasing the demand for gas and subsequently driving up UK prompt gas prices. The cost of hedging against potential price surges during the upcoming storage refill season has also risen sharply.
Despite the bullish trends impacting summer prices, the Dutch front-month futures, considered Europe’s gas benchmark, remained relatively stable at €50.00 a megawatt-hour at 10:05 a.m. in Amsterdam.
