Prices and markets right now
Europe's flagship gas contract, the Dutch Title Transfer Facility for December delivery, climbed 4.9% on Friday to 102.78 euros per MWh after popping back above 100 euros on Wednesday. That puts prices at their highest in nearly four years, a stretch that includes the post invasion spike in energy costs.
For context, TTF hit 139 euros per MWh on December 5, 2022, following a prior spike in August that year to 339 euros per MWh. The benchmark is up about 36% this month and roughly 256% over the past year. The move showed up in listed products too, with the WisdomTree European Natural Gas ETP quoted at 5,818.50 GBp, up 327.00 GBp or 5.97% at 4:29 PM GMT.
Why supplies are tightening
Intense heat across Europe and fears of a stronger-than-usual El Niño rattled commodities, and summer rebuilding of stocks was curtailed by problems moving cargoes via the Strait of Hormuz. Storage sits near 75%, the lowest seasonal level since 2011.
With inventories thin, BlackRock warned on Oct. 27 that a colder winter could lift European energy prices further, on top of a 170% rise this year. Natural gas accounts for about one sixth of the EU's energy generation.
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What analysts say and what it means for your portfolio
Europe, he argued, is essentially pinning its hopes on El Niño to deliver milder conditions - even though the U.K. and the continent have, in past El Niño years, endured some of their coldest winter stretches - said Peter Taylor, Macquarie's head of commodity desk strategy. He added, "We're in a situation now where, if we do get that cold weather, we're potentially seeing Europe compete with Asia for molecules, and that has potentially a lot of [price] upside."
Compared with the U.S. - which is cushioned by its own shale and LNG output - Europe and much of Asia face greater vulnerability to gas price shocks. As BlackRock put it, "The energy shock has uneven effects.
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