European natural gas prices have surged recently, rising from €31.45 per megawatt hour in mid-July to €39.50 today, a 26% increase over the past month. While this is well below the peak of €340 in August 2022, the security of supply in Europe remains uncertain.
Supply threats
The recent price surge is largely driven by the threat of strikes at Australian LNG plants operated by companies like Chevron and Woodside Energy. These strikes could severely impact global LNG supply, a critical concern for Europe, which is heavily dependent on LNG imports.
Reduced natural gas production in Norway is also contributing to rising prices. As a key supplier to Europe, any decline in Norwegian supply heightens concerns about Europe's energy security.
Despite the significant drop in Russian gas supplies, ongoing uncertainty about their stability remains a critical driver of market volatility and price fluctuations.
Rising carbon prices drive up costs further
Rising carbon prices in Europe are also pushing natural gas costs up, as higher carbon allowance (EUA) prices increase electricity costs, potentially impacting the price of gas due to the correlation between the two markets. Our carbon emissions forward CFD has risen 16% since mid-July.
E.ON boss warns of permanently higher prices
E.ON CEO Leonhard Birnbaum warns that Europe’s energy crisis is far from over, with gas prices potentially staying well above pre-crisis levels due to the loss of Russian imports. He told Bloomberg prices could remain "two to three times" higher than pre-crisis levels.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
