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European Natural Gas Prices Soar Over 20% as Global LNG Competition Intensifies Amidst Heatwave

On Friday (June 9) local time, as traders reassessed supply risks, European natural gas futures surged over 20%, indicating that amid a heatwave hitting Europe, the global competition for natural gas is intensifying.

Dutch near-month natural gas futures rose 21.5% on Friday, reaching €32.75 per megawatt-hour. This contract has seen a cumulative increase of over 35% this week, marking the highest surge since the most severe energy crisis in August last year.

Despite European natural gas inventories being at high levels and subdued industrial demand pressuring prices in recent months, traders are feeling uneasy about potential supply tightening. Concerns are rising that the amount of liquefied natural gas (LNG) flowing into Europe in the coming months will decrease.

With the Northern Hemisphere entering the summer season, high temperatures may increase cooling demand from Europe to Asia, intensifying the competition for LNG. Statistics show that the summer period is more profitable in the Asian market for U.S. suppliers exporting LNG to Europe.

Furthermore, analysts point out that maintenance work on LNG export facilities this summer will be extensive, which could further boost natural gas prices.

However, uncertainty remains as several major European economies have not shown significant signs of recovery in industrial natural gas demand. Data from S&P Global Commodity Insights indicates that due to a global economic slowdown and a shift toward renewable energy, natural gas demand in Germany, France, the UK, Italy, Spain, and the Netherlands fell by nearly 10% in May compared to the same period last year.

Moreover, despite this week's impressive surge, European natural gas prices have fallen by about 90% compared to their peak in August last year.

Dutch near-month natural gas futures reached a historical high of €339.2 per megawatt-hour, influenced by Russia's reduction of natural gas supplies and the widespread extreme heat in the Northern Hemisphere last summer.