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Europe’s natural gas surge stokes inflation and rate-hike fears
European benchmark gas prices have reached a five-month high, while storage is about 63% full, the lowest for this time of year in nearly two decades.
Soaring energy prices are reviving European inflation concerns after the disruption of oil and gas flows tied to the Iran war, but attention in markets has shifted toward natural gas rather than crude, OilPrice reports. European benchmark natural gas prices have climbed to a five-month high as Europe works to secure LNG supply to refill inventories ahead of winter.
The report says Europe has started losing the competition with Asia for spot LNG supply, in part due to spiking prices and the lack of most Qatari LNG term volumes. It also notes that Europe’s build in the spring and summer comes as the region aims to refill storage sites, with storage currently about 63% full, the lowest level for this time of year in nearly two decades and well below the five-year average, according to Gas Infrastructure Europe.
Rising gas costs could lift inflation further and lead to interest rate hikes beyond current expectations, the outlet adds. In European bond markets, yields on key UK and German bonds have surged to multi-decade highs amid fears that stubborn inflation will persist, with Citigroup strategist Jamie Searle saying natural gas prices have become the key driver of yields.
Latest closeWTI crude $82.40 ▲1.4%|Nat gas $2.715 ▼0.4%