Europe’s Energy Alarm Sounds: NatGas Stockpiles Draining, Prices Surge As Emergency Buffer Shrinks

European natural gas futures jumped for a third day as colder weather accelerated withdrawals from already dangerously low inventories that are well below seasonal norms across the energy-stricken continent.

Dutch front-month futures traded 3.7% higher at 89.85 euros per megawatt-hour as new data from Gas Infrastructure Europe showed that withdrawals are outpacing year-earlier levels. Prices jumped to as much as 104.65 euros last week but quickly faded as the war risk premium in energy cratered on promising diplomatic signals of a potential end to the Gulf conflict and reopening of the Strait of Hormuz.

But EU NatGas prices are rising once again because, despite promising signs of a resolution in the Gulf, the continent is three weeks into a drawdown of its gas reserves, which are already well below the 10-year seasonal average.

Winter Arrives

Forecasts point to colder conditions across the UK, Germany, France and the Alpine region. London temperatures are expected to average more than 5°C below normal on Friday and Saturday, according to Vaisala.

“Earlier expectations for a late accumulation of gas stocks as a result of the strong El Niño conditions in the Pacific causing a mild start to the winter in Europe have been dashed,” independent energy analyst and former Reuters columnist John Kemp wrote in a note.

Kemp added more color:

Northwest Europe is still only about one-tenth of the way through the typical heating season so there is a very high degree of uncertainty.

So far this winter, however, heating demand has been below the average for the last ten years, which should have helped inventory accumulation and delayed the onset of storage draws.

Instead, the failure to build stocks later into the autumn is an especially troubling signal.

Europe’s gas suppliers are expecting to rely much more heavily on imported LNG to satisfy heating and electricity generation requirements over the peak winter months from December to February.

More gas may also become available from Qatar to customers in Asia and Europe as loadings have accelerated and more LNG carriers have slipped through the Strait of Hormuz in recent weeks.

Even so, inventories are uncomfortably low and the storage situation has worsened in recent weeks with the arrival of the first spell of colder temperatures this winter.

Europe’s benchmark gas futures prices have retreated by almost one-fifth since the end of October, coinciding with the sharp fall in crude oil prices.

The United States has signalled it prefers to rely on a continuation of the shipping blockade and economic pressure rather than an imminent resumption of unrestrained warfare with Iran.

Even so, front-month gas futures have averaged €88 so far this month, almost three times higher than €32 in the same month a year ago, and the highest for nearly four years after adjusting for inflation.

Exceptionally high prices are sending a very strong signal to electricity generators, industrial users and households about the need to reduce consumption.

Europe needs to deplete storage much more slowly than average this winter to make stocks last as long as possible and avoid them falling critically low before the heating season ends.

Brussels spent years pushing an information operation to sell its globalist climate agenda, which ultimately nuked its energy security. Now Europe heads into winter with depleted gas stocks, sky-high prices, and a growing dependence on imported LNG, where it must fight for cargoes on international markets. For the pro-EU elites who promised a green energy utopia, well, you better start praying for some of that warmth – or face a devastating blow to households and industries.