Gas prices in Europe continue to rise. Why?

Prices for winter gas futures in Europe have increased by 25% in recent days, reaching more than $600 per thousand cubic meters.

Prices for gas supplies in the period from November to April added $120/thousand cubic meters on the Dutch TTF exchange. At the same time, prices «for the day ahead» jumped by 29% from Friday to €49/MWh ($550 per thousand cubic meters). Futures prices for December-March rose slightly less, by 23%, to just above $600 cubic meters. 

In principle, analysts expected growth to $600, but not before the cold weather comes to the northwest of Europe. What are the main reasons for the price increase right now? 

• Firstly, there are risks of strikes at two Australian LNG plants starting this Friday, which could lead to the loss of up to 7% of global LNG production capacity.

• In addition, gas supplies from a field near Gaza in Israel were stopped, which reduced the export opportunities of Egypt, where this gas was usually sent. 

• Another factor was the calm, windless weather in northwestern Europe, which caused a sharp increase in gas electricity generation.

• The heating season begins in Germany on Sunday, and although it is still relatively warm in October, a sharp drop in temperature to 0-10 °C is expected by the weekend.

Experts note that the European gas market is overly sensitive to any fluctuations in supply and demand, especially on the threshold of the heating season. This is a good signal for Gazprom, whose shares are trading with a P/E multiplier, which is now 12% below the historical average.