The rise in natural gas prices in Europe in November, which saw an increase of 21%, can be attributed to a combination of key factors:
- Cold weather and record withdrawals: As the heating season began, cold weather in Europe led to record withdrawal rates from gas storage facilities. By the end of November, European storage was less than 87% full, with about 96 billion cubic meters of gas remaining. Since the start of the heating season in late October, nearly 11 billion cubic meters had already been used.
- Expectations of a harsh winter: The European Centre for Medium-Range Weather Forecasts predicts that this winter will be one of the coldest in recent years, raising concerns about future gas supply and further driving up prices.
- Russian gas supply disruptions: The announcement by Austria’s OMV to suspend Russian gas flows heightened fears in the market. OMV had received notice from Gazprom Export of a termination of gas deliveries to Austria as of November 16, linked to a dispute over compensation for previous gas payments. Despite these statements, gas volumes to Austria remained unaffected.
- Geopolitical and sanction risks: The situation was further complicated by concerns over payments for Russian gas due to ongoing U.S. sanctions on Gazprombank, which added uncertainty to the security of supplies and contributed to price volatility.
These factors combined resulted in the sharp rise in gas prices, with futures contracts climbing from around $432 per 1,000 cubic meters on October 31 to $521 by November 30.
