European wholesale natural gas prices rose sharply on Tuesday as forecasters warned of a pronounced heatwave across parts of Northwest Europe and Italy that could boost electricity consumption and increase reliance on gas-fired generation.
The benchmark Dutch front-month contract advanced 4.7% to trade at 46.54 per megawatt-hour, reversing losses after a subdued session on Monday. In the United Kingdom, the comparable front-month gas contract climbed 5.1% to 111.00 pence per therm, reflecting similar upward pressure in regional markets.
Market participants flagged the heatwave as a near-term demand risk for the power sector. Higher temperatures typically lead to elevated electricity use for air conditioning, which in turn can force gas-fired power plants to boost output.
Supply-side developments also fed the rally. Gas deliveries from Norway - currently Europe’s largest supplier via pipeline - were reduced after seasonal maintenance at the Nyhamna processing plant and the Troll gas field was extended unexpectedly. Those unplanned extensions weighed on near-term flows that traders rely on to balance markets.
Adding to the immediate supply anxiety is a slower-than-usual rate of seasonal injections into the continent’s underground gas storage. Data from Gas Infrastructure Europe (GIE) show that European storage facilities are 43.1% full at present. While that level satisfies seasonal regulatory requirements, it remains markedly below the 51.4% recorded at the same point last year.
Analysts also pointed to ongoing competition for flexible spot liquefied natural gas (LNG) cargoes from Asia this summer. That competing demand has diverted spot shipments away from European terminals, leaving regional prices more sensitive to the steadiness of pipeline supplies.
Looking ahead for the remainder of the week, traders expect prices to stay elevated so long as weather forecasts continue to indicate hotter conditions. At the same time, market participants noted that any rapid recovery in Norwegian gas nominations could temper further sharp price increases.
In short, the current market backdrop is shaped by a combination of heightened demand risk from an approaching heatwave, temporary reductions in Norwegian pipeline flows due to extended maintenance, and slower-than-normal storage refill rates, all of which have contributed to the recent rise in European wholesale gas prices.