European gas prices hit record high

European gas prices reached a record high since December 2022, driven by intense competition between Europe and Asia to import liquefied natural gas (LNG) and fill winter reserves. The TTF Dutch gas futures contract, a key benchmark for European gas, hit 86.79 euros per megawatt-hour.

Winter concerns and supply issues

Analysts from ING noted that the market is grappling with the prospect of a harsh winter in the Northern Hemisphere with limited LNG supplies from the Persian Gulf. This is particularly affected by the war in the Middle East, which disrupted production and exports from Qatar.

European gas reserves below average

European gas reserves are currently filled to 73.75 percent, below the 83 percent recorded at the same time last year and below the five-year average of 89 percent. Germany's reserves are particularly low, at 59.96 percent, according to the Aggregated Gas Storage Inventory (AGSI) platform.

Low reserves drive up demand and prices

These low reserves have increased demand in a context of constrained supply, driving up prices. The high gas prices could significantly impact household heating costs, with energy regulators revising the retail price to 194.9 euros per MWh starting November 1.

Gas prices influence electricity costs

Gas prices also influence electricity prices, especially in winter when gas-fired power plants operate, as the most expensive unit in the European energy pricing system sets the price for all. While the French government has pledged to cap energy prices during the winter, the high price of oil has also remained above 100 dollars per barrel for Brent crude since the start of September and around 90 dollars per barrel for West Texas Intermediate (WTI).