European natural gas prices have surged over 75% in two months, while inventories have hit a 15-year low! Russia warns that prices are "far from peaking."

European natural gas prices continue to climb, breaking through key resistance levels, while Russia has made it clear that prices have not yet peaked, further exacerbating market concerns about energy supply this winter.

European benchmark natural gas futures (Dutch TTF) prices broke through €80 per megawatt-hour this week for the first time since 2023; UK natural gas futures also rose above 200 pence per thermal unit for the first time since 2022. Both benchmark prices hit new highs in recent years, with a cumulative increase of over 75% in the past two months.

According to Xinhua News Agency , Russian Presidential Press Secretary Dmitry Peskov stated on the 9th that although European natural gas prices have risen rapidly recently, they have not yet peaked and are expected to reach new highs in the future . He pointed out that even at the fastest pace, Europe will not be able to complete the replenishment of underground natural gas storage facilities before winter arrives.

As previously reported by Wall Street Insights , European natural gas inventories have fallen to their lowest level in 15 years, but the EU and countries like Germany have proactively abandoned their strategy of replenishing their stocks at high levels. Europe is betting on a warm winter and a structural decrease in its reliance on natural gas; if this fails, inventories could fall to 14% by next spring, forcing Europe to turn to US spot purchases at high prices, thus increasing the risk of inflation.

Inventory is running low, and restocking progress has hit a 15-year low.

The current severe shortage of natural gas in Europe has drawn widespread attention in the market.

According to the Financial Times, Europe's natural gas storage is currently at only 65.6% of its capacity, the lowest level for the same period in 15 years. Latest data from Gas Infrastructure Europe also shows that current gas storage in Europe is approximately 67% of its capacity, compared to nearly 80% a year ago.

HSBC predicts that by November 1, European natural gas inventories will account for only 73% of total gas reserves, the lowest level for this period since data collection began in 2009.

As Europe gets closer to the peak winter energy demand season, high gas prices have in turn suppressed the pace of summer restocking, creating a two-way negative feedback loop between prices and inventory, further amplifying supply uncertainty.

Despite the decline in Russian gas exports, the Nord Stream 2 pipeline remains operational.

According to Reuters calculations, Russia's pipeline gas exports to Europe fell 44% to 18 billion cubic meters last year, the lowest level since the mid-1970s, due to the closure of transit routes through Ukraine. During the peak period of 2018-2019, this figure reached approximately 180 billion cubic meters annually.

The Nord Stream gas pipeline explosion in 2022 further reduced Russia's ability to export to Europe.

However, Peskov emphasized that one of the Nord Stream 2 pipelines in the Baltic Sea remains intact and ready for use, and "can be restored to operation in a short time." He stated that the obstacles preventing Europe from using the pipeline are political factors, not technical issues, and that ultimately, it is the European economy and the European people who will suffer.

The Kremlin uses rising energy prices to exert pressure

Faced with continued pressure on the European energy market, the Kremlin has clearly intensified its rhetoric.

Peskov stated that Europe could have switched to cheaper Russian energy—both pipeline and liquefied natural gas—much earlier, but instead chose to buy at high prices on the spot market, which was a self-inflicted wound. "Russian natural gas, including pipeline and liquefied natural gas, could have been a much cheaper option long ago."

It is worth noting that the high European natural gas prices are directly related to the impact of the war with Iran on the global energy market. The benchmark European gas price once reached 75 euros per megawatt-hour last week, more than double the level of a year ago.

Against this backdrop, Russia's statement that "prices have not yet peaked" undoubtedly poses a new pressure signal for European companies and investors who are assessing their energy cost exposure this winter.

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