In recent weeks, developments in the European energy market and the performance of natural gas prices have once again taken center stage. The benchmark cost in Europe shows a strong escalation driven by a combination of persistent winter cold and an increasingly complex geopolitical environment.
Low temperature influences the rise in natural gas prices
A look at Dutch TTF futures, which act as a thermometer for the European gas market, shows an unusual monthly advance. This movement reflects growing demand for heating and power generation in the middle of winter and additional pressure on storage levels.
Throughout January, temperatures have been below the seasonal average in a large part of the continent. This situation has accelerated withdrawals of stored gas at a rate at a rate not seen for several years. At the same time, energy consumption has steadily increased in households and industry.
At the same time, the international context has added volatility. Some episodes of extreme cold in the United States have temporarily affected gas flows to LNG exporting plants. This factor has reduced the supply available on the global market just when Asia and Europe are competing for the same cargoes.
On the other hand, fund managers and financial traders have shifted from holding bearish bets to building long positions in the European gas market. This shift strengthens the perception of a tighter market in the short term.
Finally, the tension between the United States and Iran has raised the perceived risk on strategic supply routes. The Strait of Hormuz remains a critical point for LNG trade from the Middle East.
Source: OilPrice
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