European gas prices vaulted to record highs this summer, driven by factors ranging from low inventories and outages to an Asian buying spree, and signalling further rises in coming months that could mean higher household bills this winter.
"A confluence of factors occurring at the same time has caused the recent bull run with record low gas storage, outages, prolonged production issues and active Asian buying," said Nick Campbell, a director at consultancy Inspired Energy. A cold winter at the beginning of this year prompted large drawdowns in storage stocks, which would usually be replenished during summer months when demand tends to be weaker.
But a series of unexpected supply disruptions, coupled with a rebound in demand as economies recover from COVID-19 restrictions, has led to a scarcity of gas.
Data from the IEA showed European gas consumption rose by an estimated 25% in the second quarter of 2021, its largest year-on-year quarterly increase since at least 1985.
Prices of liquefied natural gas (LNG) have also soared in Asia as buyers in the region sought to replenish stocks before winter. Although European prices are high, the spread has not been high enough to attract tankers to Europe.
Gas scarcity this summer is already affecting winter gas contracts. Price spikes in the wholesale gas market, if prolonged, can drive up retail gas prices for households.