Gas prices in Europe are near record highs due to an abnormal heat wave — Financial Times
Natural gas prices in Europe are approaching their highest levels since the start of the war in Iran. Several factors are putting pressure on the market: a new heat wave, rising demand for electricity and increased load on gas-fired power plants, delays in maintenance work at a key field in Norway, and the upcoming solar eclipse.
During trading, the benchmark TTF futures contract briefly rose above €62 per megawatt-hour, approaching the peak of €63 per MWh set on July 24, which was the highest level since January 2023. Prices later fell slightly amid renewed hopes for a possible peace deal between the U.S. and Iran, having previously reached €60.85 per MWh.
Demand for gas for electricity generation has surged this summer due to the widespread use of air conditioners during the heat wave and the forced reduction in output at nuclear and coal-fired power plants. The river water needed to cool these plants has become too hot, and in many regions, water levels have dropped to critical levels.
In particular, the Romanian state-owned utility Nuclearelectrica warned of a possible shutdown of the second unit at the Cernavodă Nuclear Power Plant due to critically low water levels in the Danube, after the first unit had already been shut down on July 31. In the UK, meteorologists issued an “amber” alert due to temperatures reaching 38°C, which also increases the load on gas-fired power generation, which itself suffers from high temperatures.
According to Wood Mackenzie, demand for gas for power generation in Western Europe in July was 714 million cubic meters above normal and continues to exceed the five-year average in August.
An additional source of pressure is the first total solar eclipse of this century, which will be visible in continental Europe. According to the French grid operator RTE, due to the eclipse, Europe will temporarily lose about 9.7 GW of solar generation for several hours in the evening. This is forcing grid operators to bring online gas-fired capacity, causing day-ahead electricity prices in Germany to rise by approximately €200 to €461.17 per MWh.
Meanwhile, Norwegian pipeline operator Gassco announced that it was forced to extend maintenance work at Shell’s Ormen Lange offshore field due to technical issues.
The situation is further complicated by limited global supplies of liquefied natural gas (LNG) due to shipping risks in the Strait of Hormuz and reduced production in Qatar amid the conflict with Iran. As European storage levels remain low, analysts note that even minor market imbalances are causing sharp price spikes.
Source: Financial Times
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