European Natural Gas Prices Diverge from Oil as Storage Levels Plummet

Natural gas prices in Europe are diverging from oil prices due to structural tightness in the European market, according to Commerzbank's Norman Liebke.

Tighter supply and demand dynamics, particularly with Qatar LNG being cut off and US cargoes redirected to Asia, have led to historically low storage levels in Europe. Storage levels are currently 17 percentage points below the five-year average and may only reach 70% by the start of the heating season.

The European Commission is increasingly relying on LNG imports during the winter, but this comes with corresponding price risks. The El Niño weather phenomenon is expected to drive up gas demand in Asia over the coming weeks and months, further straining supply.