European gas prices hit highest level since 2022

Europe's benchmark natural gas price rose above €90 per megawatt-hour on Tuesday, October 20, for the first time since December 2022. Competition with Asian buyers for liquefied natural gas (LNG) is getting tighter as both regions prepare for winter, Investing.com reported.investing.com

The Dutch front-month contract at the TTF hub rose about €2 from the previous day in late-morning European trading, according to Intercontinental Exchange ↘ 0.49% data cited by Investing.com. A Dow Jones Newswires headline also reported a 2.2% gain past the €90 level. Earlier in the session, the contract had dipped from overnight highs, Euronews reported.tradingeconomics.com+2

Gulf supply squeeze

The rally comes from supply problems in the Middle East. Limited LNG shipments from the Gulf are making it harder for the European Union to refill its depleted storage. LNG flows from the region remain about 80% below last year's levels, according to Trading Economics. Prices have climbed since war broke out in the Middle East in late February and shipping through the Strait of Hormuz was disrupted. In February, the TTF price was near €32, The Brussels Times reported.tradingeconomics.com+1

Security worries are adding to the pressure. UK Maritime Trade Operations reported that a small boat fired on an LNG tanker off Yemen on Saturday, October 17, Euronews reported. Brent crude also held near a five-month high on Tuesday.uk.finance.yahoo.com

Bidding war with Asia

Asia's spot LNG prices rose on Monday, October 19, to their highest level since December 2022, Bloomberg reported, citing traders, according to Euronews. Flexible LNG cargoes, particularly from the US, can be sent to whichever market pays the most. That has made Europe raise its prices to outbid Asia for spare supply, analysts at Timera Energy said. From March through July, Europe's share of US LNG exports fell 16 percentage points from a year earlier to 51%, Crux Investor reported.bankomat.am+2

ING strategists Warren Patterson and Ewa Manthey had warned that "as we move closer to the Northern Hemisphere winter, competition between the two regions is likely to pick up, particularly if Qatari LNG remains largely absent from the market through year-end," Investing.com reported.ph.investing.com

Storage still short

As of October 18, European storage sites were 74.31% full, still below normal for this time of year, according to Trading Economics. The same data show prices up about 20% over the past month and more than 170% from a year ago. European Commission President Ursula von der Leyen told the European Parliament before last week's EU summit that gas prices had risen 140% since the end of February, The Brussels Times reported.brusselstimes.com+1

Prices are still well below the record of about €345 set in March 2022. However, they could spike further if winter is colder than expected and supply disruptions continue, Trading Economics noted.tradingeconomics.com