European natural gas prices have climbed to a two-year high, driven by colder temperatures and dwindling storage levels. 

Benchmark futures surged by as much as 5.4% on Monday, reaching €58.75 a megawatt-hour – the highest point since February 2023. This surge follows four consecutive weeks of price increases.  

Freezing temperatures forecast for Northwest Europe are expected to further boost heating demand, exacerbating the already tight supply situation.  This increased consumption threatens to deplete gas stockpiles, which are currently at their lowest level for this time of year since the 2022 energy crisis.  

The combination of cold weather and low wind conditions across Europe has increased gas consumption this winter while simultaneously impacting renewable energy generation.  Gas inventories currently stand at only 49% full, compared to 67% at the same time last year, making it more challenging to replenish supplies during the warmer months.  

Market analysts are also monitoring the potential impact of US tariffs and retaliatory measures, which could increase the cost of liquefied natural gas (LNG) imports.  The upcoming summer maintenance season in Norway, a key gas supplier, may further limit supplies during a period of already tight market conditions.  

According to ICIS's monthly outlook, European gas consumption is projected to increase by 17% this month compared to last year, fueled by demand from residential and commercial sectors.  ICIS forecasts that gas inventories will be only 37% full by the end of winter.  

Dutch front-month futures, the European gas benchmark, rose 4.6% to €58.30 a megawatt-hour in Amsterdam.  Traders are also actively seeking protection against further price increases, indicating expectations of potential supply disruptions. (ILKHA)