Make Kitco Your Homepage

Gas prices in Europe are hiking this summer. What are the forecasts for the future?

Commentaries & Views

European gas prices hiked by tens of percent last week, confirming the overall trend observed in June. As we all remember the energy carrier crisis in 2022, it’s the moment to work out what’s going on and whether we should be afraid of new potential problems. This text aims to explore the reasons behind the rising gas prices in Europe and what to expect in the future.

To begin, let’s check the chart illustrating the changes in European gas prices since the beginning of 2022. We will focus on the Dutch TTF natural gas price because it serves as a benchmark for continental Europe. This chart provides a clear overview of various global events over the past year and a half, including the start of military conflict between Russia and Ukraine, restrictions on natural resource purchases from Russia, the summer peak of the energy crisis, and the subsequent price dip when the winter turned out to be warmer than expected.

It seems that the price decline has been continuing, but let's shift our focus to June. Well, now we're talking! Following that, we observe a new trend emerging from the start of the summer. Also, one should remember that a good trader is distinguished by the ability to use special tools, making their trading in various markets more efficient. For instance, stock screener can help identify suitable stocks based on specific criteria.

The price hike observed last week was influenced by news regarding the Netherlands’ plans to close the Groningen gas field this October, a year earlier than anticipated. This collaborative initiative of ecologists and the government was prompted by multiple earthquakes, with some reaching a magnitude of 3.6 and having a lasting impact for the past 35 more years.

The Groningen gas field is a significant object for Western Europe – it has supplied various countries with natural gas since the 1960s. However, the last ten years have seen gas production decrease, suggesting that its closure might not have a major long-term effect on prices. Accordingly, prices have adjusted over the course of several days.

But the Groningen factor isn’t the sole reason for the price increase. Among the others, there are supply disruptions from Norway connected with miner strikes and hot weather, which lead to higher gas consumption through increased usage of air conditioning systems.

Considering it is only June, temperatures are expected to keep rising. Also, experts expect a rise in demand for natural gas in China in the coming months, which will likely impact prices as well.

Nevertheless, despite the upward trend, the general situation in Europe is unlikely to resemble the past year’s nightmare. Storage facilities currently hold more reserves compared to the previous summer, and the necessity to have alternative gas suppliers is not as sudden this time. In other words, while natural gas prices are expected to rise in the next few months, experts do not anticipate significant increases.

Here we should leave a friendly reminder. If you are going to make trades with energy resource futures or any other assets, it is essential to conduct your own analysis. Experts’ opinions are a great addition to your research, however they should not solely define your trading strategy.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.