Europe's Natural Gas Prices Soar Amid Inflation Fears
Soaring energy prices have reignited inflation concerns in Europe, but policymakers and bond markets are more worried about the surge in natural gas prices than oil futures.
The European benchmark for natural gas has reached a five-month high as the region scrambles to secure liquefied natural gas (LNG) supplies ahead of winter. This comes as Europe is trying to build up its natural gas inventories, but current storage levels are at their lowest in nearly two decades.
According to data from Gas Infrastructure Europe, storage levels are about 63% full, which is well below the five-year average. The spiking gas prices threaten to raise inflation further and prompt interest rate hikes beyond expectations.
Jamie Searle, European rates strategist at Citigroup, noted that natural gas prices have become the key driver of yields in European bond markets.