The sharp surge in European gas prices on February 3 can be attributed to a combination of factors. The most significant drivers are increased demand for heating during cold temperatures and the expiration of the EU’s price cap. The benchmark Dutch TTF gas price for March delivery surged to €53.9 per megawatt-hour (MWh), the highest since late October 2023, marking an 11% increase since the previous week and a 50% rise since mid-September 2023.
The price cap, which had been implemented by the European Commission in late 2022 to prevent gas prices from spiraling out of control due to the war in Ukraine and disruptions in Russian gas supplies, expired on February 3. The cap suspended trading if the TTF price exceeded €180/MWh or if the price was €35 higher than the global LNG reference price for three consecutive days. The cap had offered some protection against volatile pricing, but with its expiration, gas prices are now subject to market forces once again, leading to the price spikes.
Additionally, cold weather is exacerbating gas demand, as Europe has experienced two mild winters recently. As of early February 2025, EU-wide gas storage levels are at 53.11% capacity, falling below the 60% target, which adds further pressure on the market. This confluence of factors is contributing to the higher gas prices being observed.
