European Gas Prices Pause Near Multi-Week Highs Amid Geopolitical Tensions
European natural gas prices showed slight declines on Monday but remained near multi-week highs. The Dutch front-month benchmark traded at 74.50 euros per MWh, down 0.2%, while British wholesale front-month gas fell 0.5% to 187.00 pence per therm. The market took a pause after several weeks of sharp gains, balancing geopolitical tensions with signs of recovering energy supplies.
Geopolitical risks in the Middle East kept a risk premium in energy markets. Yemen’s Saudi-backed government launched a military campaign against Houthi forces, prompting retaliatory strikes on Saudi Aramco facilities. However, some supply concerns eased as Saudi Arabia partially resumed operations on its East-West Pipeline and restarted tanker loadings from Yanbu.
Despite the calm in intraday trading, European gas contracts maintained a firm structural base. Underground storage levels in the European Union were about 12 percentage points below those at the same time last year, leaving the region vulnerable to early-season cold weather or new transit constraints. This shortage limited downside across forward curves.
Analysts at Bank of America noted that the Middle East conflict is contributing to elevated energy prices, with potential knock-on effects for inflation and interest rates. However, they do not expect a deep downturn driven primarily by energy markets, stating that current energy prices and interest rates are not high enough to suppress demand.