European natural gas futures are trending upwards as traders assess the risks of a cold spell occurring at the end of the season. Market volatility has been persistently intensifying since the beginning of the year, influenced by tight inventories and an increased sensitivity to weather changes.

Some forecasting models indicate a potential stratospheric warming event is forming—a phenomenon that can trigger outbreaks of intense cold air—elevating the risk of a late-season temperature drop in Northern Europe during March, which could subsequently boost heating demand. The recent wave of selling has also prompted market participants to question how much further prices can fall, given that investors still maintain substantial long positions.

The European natural gas market has experienced significant turbulence since the start of the year, with futures prices fluctuating repeatedly due to changes in weather forecasts, adjustments in speculative positions, and broader commodity market movements. Current inventory fill levels remain below 40%, and if another cold wave hits at a critical juncture, stockpile drawdowns could accelerate, particularly in scenarios where renewable energy generation is weak, necessitating greater reliance on natural gas and coal-fired power generation.

As of 3:51 PM Amsterdam time, the European benchmark, the Dutch front-month natural gas futures contract, had risen by 1.6% to 33.38 euros per megawatt-hour.