European and British wholesale natural gas prices increased on Wednesday, with lower-than-average storage levels and disruptions to liquefied natural gas (LNG) shipments remaining in focus.
The benchmark Dutch front-month TTF contract rose 2.7% to approximately €82.00 per megawatt-hour (MWh), resuming its advance after a pause on Tuesday.
In Britain, the equivalent NBP wholesale gas contract gained 2.5% to 203.00 pence per therm, reaching levels not seen for several years.
EU Gas Storage Stands at 68% of Capacity
Underground natural gas storage facilities across the European Union were approximately 68% full, around 16 percentage points below the five-year seasonal average.
The figures indicate a lower level of stored gas than usual as the summer injection season approaches its conclusion.
European utilities face higher costs when replenishing reserves, while disruptions to shipping through the Strait of Hormuz have restricted LNG supplies from the Persian Gulf.
The combination of lower storage levels and reduced LNG flows has contributed to concerns about gas availability ahead of the winter heating season.
ECB Policymakers Monitor Energy-Related Inflation
The increase in natural gas prices has also become a focus for European Central Bank policymakers.
The ECB raised its deposit facility rate by 25 basis points to 2.50% last Thursday.
Governing Council member Peter Kazimir subsequently identified natural gas and electricity prices as significant risks to the eurozone inflation outlook, placing greater emphasis on these costs than on crude oil.
Kazimir warned that higher gas prices could feed through to household electricity bills and agricultural production costs, including fertiliser.
Eurozone headline inflation reached 3.3% in August, with the energy component increasing 14.3%.
ECB policymakers have indicated that further action could be necessary if persistent energy price increases cause medium-term inflation to move further above the central bank’s 2% target.
Markets Await Federal Reserve Decision
The rise in European gas prices coincided with expectations of further monetary policy tightening.
Market pricing indicated an 86% to 92% probability of a Federal Reserve interest rate increase at Wednesday’s meeting.
Money markets also anticipated another ECB rate increase before the end of the year.
Energy market participants continued to assess the implications of LNG supply disruptions, below-average European storage levels and higher inflation for wholesale gas prices.
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