Europeans are paying more this winter for the natural gas many use to heat their homes.
With demand high because of unusually cold weather throughout the continent, and with supply limited because of dwindling stockpiles, the price of gas shot up this week to a two-year high of 1.68 euros ($1.73) for a therm, which equates to around 2.83 cubic meters of the fossil fuel.
Futures being traded at the Title Transfer Facility in the Netherlands, a hub that acts as a virtual trading point for natural gas, went up by 4 percent, to 58 euros per megawatt-hour, or some $635 per thousand cubic meters, the highest level since February 2023.
The higher price will impact most people on the continent because natural gas is used in power stations to generate electricity.
Arne Lohmann Rasmussen, chief analyst at Global Risk Management, told Bloomberg: "The risk of the European Union entering the spring with very low gas inventories has increased in the last couple of weeks."
Rasmussen said the limited supply has led to short-term price spikes, and also looks to be impacting long-term gas pricing.
Gas companies reported European storage levels were down to 49 percent of capacity on Feb 10, in comparison to the 67 percent they were at on the same day last year.
The United Kingdom is understood to be at particular risk of fast-rising prices because its gas storage facilities are far smaller than those in many other European nations, which means it has to buy gas more frequently from overseas suppliers.
Experts say the price of gas has also been nudged up by the Russia-Ukraine conflict because both nations have been major suppliers of the commodity to European nations.
With supplies dwindling, European governments could be forgiven for hoping for better weather and a let-up in demand, but that looks unlikely, with northwestern Europe set to be hit by freezing temperatures in the coming days that will likely mean demand in February is 17 percent higher than during the same month last year.
Policymakers in the European Union are also concerned the bloc's rules aimed at managing gas supplies could end up doing harm when gas companies restock this summer.
Reuters said the bloc recently introduced binding targets to ensure gas storage levels are at 90 percent of capacity every November, but it is concerned the target means sellers can effectively push up prices during the summer, knowing the EU has no choice other than to buy the product and restock to mandated levels.
As reported by Bloomberg on Tuesday, Trading Hub Europe GmbH, which oversees Germany's gas market, is in discussions with policymakers about a potential subsidy scheme to encourage stockpiling. Its managing director, Torsten Frank, said no decision had been made yet, adding that discussions with the ministry and regulator were still ongoing.
