Rising Natgas Prices: Winter Outlook
Date: 27 August 2026
Overview
Natural gas prices are experiencing significant increases in both the US and Europe, driven by distinct fundamental factors. In the US, the surge is attributed to a heatwave, while Europe faces supply concerns as the heating season approaches.
European Market Dynamics
In Europe, the gas storage levels are alarmingly low, currently at about 63-64%, which is below the 5-year average of 81% and the minimum of the past five years. Analysts predict that storage may only reach around 70% before winter, risking depletion to below 20% by the end of the season. This situation is slightly better than during the previous energy crisis in 2021, where storage was filled to 77% despite supply issues from Russia.
Additional factors contributing to the European market's volatility include geopolitical tensions in the Middle East and adverse weather conditions, which have reduced renewable energy generation, leading to increased gas consumption. Prices in Europe could potentially rise to 90-120 EUR/MWh this winter, although current forward market structures do not fully reflect this risk.
US Market Dynamics
In the United States, a heatwave has increased demand for natural gas, particularly for air conditioning, which has limited inventory growth to just 15 bcf compared to the 5-year average of 33 bcf. Despite this demand, high production levels from the Permian Basin and expanded transmission infrastructure are keeping inventory levels high, making it challenging for prices to exceed 3.00 USD/MMBtu sustainably.
The number of cooling degree days in the US is significantly above the 5-year average, indicating persistent high temperatures. However, demand is expected to taper off as October approaches.
Futures Market Analysis
The futures market shows a stark contrast between short-term pressures and long-term expectations. In Europe, the market is in a state of backwardation, with current spot prices significantly higher than those projected for the coming years. This indicates that investors are willing to pay a premium for immediate security, while anticipating a gradual market stabilization.
In the US, the futures curve reflects typical seasonal patterns, with price peaks expected in the winter months. However, the current strong domestic supply is suppressing prices in the near term, despite a recent uptick in demand.
Conclusion
While the fundamentals of the natural gas markets in the US and Europe differ, external factors such as geopolitical tensions and LNG market dynamics are causing price increases on both sides of the Atlantic. The outlook for winter remains uncertain, with potential for significant price volatility.