Record prices reflect Europe’s winter gas fears

It is difficult to predict just how the continent’s supply and demand will balance

The benchmark Ice TTF front-month European gas contract crested a new record high above €225/MWh ($227/MWh)  in mid-August, having previously shied away from €200/MWh in early March’s previous peak, with over-the-counter (OTC) prices following suit (see Fig.1). The eye-watering price levels are testament to the fear and uncertainty over how Europe might cope if Russia cuts supply further—a bellicose statement by Russia’s Gazprom was the catalyst for the latest price spike. But it may also be a reflection of a traded gas market that has become both less liquid, therefore amplifying price moves, and more prone to moving on rumour rather than fundamentals.