Natural gas prices in Europe spiked overnight due to a combination of sudden weather changes, concerns about supply security, and shifts in energy production across the continent. To understand why this happened, it helps to look at each factor one by one and see how they came together to push prices higher in a very short time.
First, the weather played a big role. Forecasts showed that temperatures in key European countries like France and Germany would drop about 2 degrees Celsius below seasonal averages starting in mid-October. When it gets colder, people use more gas to heat their homes and businesses. Traders in the gas market saw these forecasts and started buying more gas futures, expecting that demand would rise quickly. This buying pushed prices up, especially since the cold snap was coming earlier than many had expected. In fact, European natural gas futures climbed to a six-week high as these forecasts became clearer, with the largest daily gain since June happening just as the weather news broke[1].
At the same time, there were worries about gas supplies. Russia launched its largest wave of attacks on Ukraine’s gas infrastructure since the war began. Ukraine is an important transit country for Russian gas going to Europe, and any damage to its pipelines or storage sites could disrupt flows. Even though Europe has been trying to reduce its reliance on Russian gas since the war started, any threat to existing supplies still makes the market nervous. Traders started to worry that Europe might need to send more gas to Ukraine to help it through the winter, which would mean less gas available for the rest of Europe. These fears added to the upward pressure on prices[1].
Another factor was the state of Europe’s gas reserves. Going into the winter, Europe’s gas storage sites were about 83% full, which is a healthy level. Countries like Italy and France had even higher levels, while Germany was a bit lower. Normally, this would help keep prices stable because there is a cushion if demand spikes. However, if the cold weather arrives early and is severe, countries might have to start using their stored gas sooner than planned. This would mean drawing down reserves faster, which could lead to shortages later in the winter if the cold persists. The possibility of having to tap into storage early made traders more eager to buy gas now, pushing prices up further[1][2].
The gas market itself also saw a lot more activity. Open interest in Europe’s benchmark gas futures reached a record high, meaning more traders were involved and more contracts were being bought and sold. This increased liquidity can sometimes lead to bigger price swings, especially when new information—like the weather forecasts or news about Ukraine—hits the market. After months of relatively stable prices, the market broke out of its narrow range and prices jumped as traders reacted to the new risks[2].
Renewable energy production added another layer of complexity. In the first week of October, solar and wind power generation increased in many parts of Europe, which normally would reduce the need for gas-fired power plants and put downward pressure on gas prices. France and Germany saw big jumps in solar output, and wind power also rose in several markets. However, these increases were not enough to offset the surge in heating demand from the cold weather. In some places, like Spain and Portugal, renewable generation actually fell, which meant gas was needed even more to fill the gap. So, while renewables helped in some areas, they could not prevent the overall spike in gas demand caused by the cold[3].
Electricity prices in Europe also reacted to these changes. In the first week of October, electricity prices in major markets like Germany, Belgium, Britain, Italy, and the Netherlands went above 100 euros per megawatt-hour. This was partly because gas is often used to generate electricity when demand is high or renewable output is low. As gas prices rose, so did electricity prices, creating a ripple effect across the energy system[3].
Finally, it is important to note that Europe has been receiving steady flows of liquefied natural gas (LNG) in recent weeks. This has helped ease some concerns about supply shortages, but LNG cannot always respond instantly to sudden spikes in demand. If the cold weather continues or gets worse, Europe may need even more LNG, which could strain global supplies and push prices higher still[2].
In short, the overnight spike in European natural gas prices was caused by a perfect storm of colder-than-expected weather, fears about supply disruptions due to attacks on Ukrainian infrastructure, the need to manage gas storage carefully, a surge in trading activity, and mixed results from renewable energy generation. All these factors came together at once, leading to a sharp and sudden increase in prices as the market tried to adjust to the new risks and uncertainties facing Europe’s energy system as winter approaches[1][2][3].