European gas futures have experienced a significant rise amidst the escalating conflict in Gaza, which poses a threat of widespread turmoil.
In the early hours of Wednesday, contracts traded in the Netherlands, a key benchmark for the European market, increased by about 6%.
This surge followed growing concerns about instability in the Middle East after U.S. airstrikes on Iraqi targets and new attacks by Houthi militias on shipping vessels in the Red Sea. Oil prices also climbed in response to these developments.
Although the impact on supplies due to rerouted shipping routes is not yet clear, the market remains on high alert due to potential risks to major energy export routes.
Some vessels carrying liquefied natural gas have changed their routes to avoid the Red Sea, embarking on longer journeys that may extend over a month, according to Bloomberg’s ship tracking data.
However, European gas prices have moved within a relatively narrow range in recent days, showing a downward trend of more than 50% since the beginning of the year.
This is attributed to increased fuel stocks and a relative decline in demand, boosting confidence in Europe’s ability to comfortably navigate the current heating season.
Timera Energy, a consultancy for the sector, noted in a memo that the market remains stable and resilient despite approaching 2024, amidst numerous risks of price hikes such as geopolitical tensions and transportation risks through the Red Sea.
Mild weather is expected to continue across most of Europe until early January, leading to reduced demand for gas used in heating.
Several countries have taken advantage of this to replenish fuel stocks during the Christmas period. Germany, Austria, Belgium, and Denmark were among the nations that registered a slight increase in gas storage on Monday, according to Gas Infrastructure Europe.
In conclusion, January gas contracts in the Netherlands rose by 5.6% to 36.08 euros per megawatt-hour at 8:48 AM Amsterdam time, while equivalent contracts in the United Kingdom increased by 5.7%.