European natural gas prices climb amid bullish shift

European natural gas futures surged over 9% this week to reach €35.7 per megawatt-hour, marking one of the sharpest weekly increases in recent months.

European natural gas prices climb amid bullish shift

The rally was driven by a notable policy shift, as EU lawmakers approved a reduction in the gas storage requirement for the upcoming winter season—from the previous 90% to a more attainable 83% by November 1. The decision, prompted by depleted reserves following a colder-than-expected winter, was seen as a pragmatic adjustment that could relieve some of the pressure on operators and improve the odds of meeting supply targets. Market participants welcomed the move as a signal that Brussels is willing to balance energy security goals with on-the-ground constraints, particularly as restocking efforts ramp up heading into the summer. Despite the short-term relief, the broader gas market remains fragile. EU gas inventories currently stand at just 41.84% full, well below seasonal norms, underscoring the challenge ahead in achieving even the lowered threshold. With Russian pipeline flows still significantly curtailed and the bloc’s 2027 target to eliminate Russian gas dependency fast approaching, attention has shifted sharply to alternative suppliers—particularly U.S. LNG exporters. Yet even these sources are facing mounting competition from Asia, where persistent heatwaves are driving up cooling demand and soaking up flexible cargoes.

Fresh uncertainty over global energy supply chains

In addition, rising trade tensions and the risk of further tariffs—particularly between the U.S. and China—are creating fresh uncertainty over global energy supply chains. While recent signs of progress in trade negotiations have calmed markets somewhat, structural risks remain embedded, keeping price volatility elevated. Analysts warn that any disruption to transatlantic LNG flows, shipping bottlenecks, or geopolitical shocks could lead to sharp upward moves in gas prices, especially given the narrow supply margins. Forward contracts for winter delivery have already begun to climb, reflecting increased hedging activity by utilities and industrial users. Meanwhile, concerns over infrastructure bottlenecks within the EU—such as limited regasification capacity in key transit hubs like Germany and the Netherlands—continue to add to the sense of urgency.