Investing.com – European and British wholesale prices surged nearly 5% on Monday, breaking through major psychological resistance levels to touch fresh 2022 high watermarks as intensifying Middle East transit disruptions and warnings over depleted storage reserves rattled energy bourses.
The jumped almost 5% to breach the key 200.00 pence mark, trading firmly above the barrier at 201.50p per therm and touching its highest level since late 2022.
In continental Europe, the gained roughly 5% to trade at 83.40 euros per megawatt-hour (MWh), also surging to fresh multi-year peaks as trading desks scrambled to reprice geopolitical risk across the forward curve.
The upside move across European gas curves was further catalyzed by stark warnings from Asia’s top energy buyers regarding Europe’s structural winter vulnerabilities.
Yukio Kani, Global CEO and Chair of JERA – Japan’s largest power generator and one of the world’s biggest buyers of liquefied natural gas (LNG) – warned on Monday that Europe’s gas reserves remain low and that shipping disruptions around the Strait of Hormuz could be prolonged.
Data from Gas Infrastructure Europe shows underground storage facilities are only about 68% full—lagging historical seasonal averages by nearly 17 percentage points at a point in the year when tanks are typically nearing maximum capacity.
Military friction in the Persian Gulf has reduced LNG tanker traffic through the Strait of Hormuz to a trickle, directly threatening Qatari exports that account for a significant portion of global flexible LNG supply.
Following an advance by Yemen’s Houthi militants near Red Sea transit corridors and fresh strikes on regional pipeline infrastructure, alternative maritime routes remain severely constrained.
Energy inflation impulse drives central bank rate expectations
The sharp rally in natural gas – coupled with jumping another 3% to near $112 a barrel – is severely exacerbating stagflationary pressures across European economies.
Surging energy input costs come on the heels of the European Central Bank’s decision last Thursday to raise its deposit facility rate by 25 basis points to 2.50%.
With European gas prices pushing to fresh multi-year peaks, money markets are pricing in high odds that central bankers from Frankfurt to Washington will be forced to maintain restrictive policy stances well into next year to prevent energy shocks from triggering broader price spirals.