European gas markets are showing signs of growing caution. Option contracts traded recently suggest that some market participants believe natural gas prices could reach €50 per megawatt-hour (MWh) next summer, a roughly 60% jump from current levels, which have been around €32/MWh.
These are the kinds of prices traders may lock in now, during this storage season, anticipating both seasonal demand and potential supply disruptions.
Key Drivers Behind These Moves
Several factors are contributing to this buildup of bullish hedging and heightened risk perception:
- Winter / Summer Storage Cycles
Summer is when gas inventories get filled for the winter. If supplies tighten or storage refills slower than expected, prices can become vulnerable. - EU Policy Shifts on Russian Gas / LNG
The EU is fast-tracking its phase-out of Russian liquefied natural gas (LNG). What was originally slated for end-2027 is now being pushed to January 1, 2027.
Sanctions and bans are also in discussion that would limit future contracts with Russian exporters. These changes increase supply risk, especially in a market that already has tight infrastructure in places. - Lagging New Capacity
While more liquefied natural gas (LNG) projects are expected to come online in 2026-2027, many of these are delayed, which means near-term supply may not grow as rapidly as traders hoped. That amplifies risk if winter is harsher or demand more intense. - Reduced Volatility but Elevated Risk Tone
Recent months have seen volatility drop toward levels before the 2022 energy crisis, giving a sense of calm. But calm can be deceptive — and many traders seem to be betting that risk is still present, especially around policy changes, weather, and supply chain constraints.
Policy & Geopolitical Context
The EU is accelerating its sanctions package (the 19th one) to include a ban on Russian LNG imports earlier than planned. This helps reduce Russia’s revenue from energy exports and reinforces the bloc’s push for energy diversification.
Some member states (notably Hungary & Slovakia) have expressed concerns that such bans could raise energy costs or threaten supply security, making unanimous approval somewhat uncertain.
What to Watch / What Could Go Wrong
Here are key risk points, and what to monitor closely:
| Risk | Potential Trigger | Implication if Triggered |
|---|---|---|
| Cold Winter | Early winter, especially late-season cold snaps in Northern/Eastern Europe | Higher than expected draw on inventories; tight supply; dramatic price spikes |
| Policy Delays or Pushback | Member state resistance to bans; delays in LNG project completions; geopolitical shifts | If phase-outs slip, market may get relief; if not, higher risk remains |
| Supply Chain Disruptions | Issues with LNG export chains; infrastructure outages; maintenance delays | Can worsen tightness, hamper inventory builds |
| Demand Surprises | Unexpected demand from Asia, industrial jumps, extreme weather | Could pull supply away from Europe; elevate prices |
What’s Likely
Prices could reach €50/MWh next summer if the market faces one or more adverse conditions: a cold previous winter, limited LNG supply, and policy tightening on Russian imports.
However, a base case for many is still somewhat lower — that with new supply and moderate weather, summer 2026 prices may settle somewhere between €35-45/MWh, unless supply or demand shocks change the equation.
For now, the speculative option contracts show that at least some players believe the risks are large enough to hedge aggressively.
Even with encouraging signs of more supply coming, the European natural gas market is behaving as if it’s bracing for risk. Between policy shifts, slower capacity builds, and seasonal dynamics, traders are already placing bets for next year that reflect heightened concern. If conditions worsen, €50/MWh isn’t out of the question. But much depends on policy execution, weather, and global LNG flows in the meantime.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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