European natural gas prices are surging, breaking through key resistance levels on both benchmarks, while Moscow has made it clear that prices have yet to peak, intensifying market concerns over energy supply security this winter.

The European benchmark gas futures contract (Dutch TTF) broke above €80 per megawatt-hour this week for the first time since 2023, while UK gas futures also pierced the 200 pence per therm level for the first time since 2022. Both benchmark prices have hit multi-year highs, with cumulative gains of more than 75% over the past two months.

According to reports, Russian presidential press secretary Dmitry Peskov said on the 9th that despite the recent rapid rise in European gas prices, they have not yet reached their peak and are expected to set new highs in the future. He pointed out that even at the fastest pace possible, Europe will not be able to complete the refilling of its underground gas storage facilities before winter arrives.

European gas inventories have fallen to their lowest level in 15 years, yet the EU and countries like Germany have voluntarily abandoned high-price refilling efforts. Europe is betting on a mild winter and a structural decline in gas dependence; if that bet fails, spring inventories could fall to 14%, forcing Europe to purchase at high prices from US spot markets and pushing up inflation risks.

Storage emergency: refilling pace hits 15-year low

The severity of Europe's current gas storage situation has drawn widespread market attention.

European gas storage levels currently stand at only 65.6% of capacity, the lowest for this time of year in 15 years, according to reports. The latest data from Gas Infrastructure Europe also shows that current European storage levels are around 67% of capacity, compared with nearly 80% a year ago.

HSBC predicts that by November 1st, European gas storage levels will reach only 73% of capacity, the lowest for that period since data collection began in 2009.

With the distance to Europe's winter energy demand peak shrinking, high gas prices have in turn suppressed the summer refilling pace, creating a two-way negative feedback loop between prices and storage levels that further amplifies supply uncertainty.

Russian gas exports shrink while Nord Stream 2 remains available

According to Reuters calculations, due to the closure of the Ukraine transit route, Russian pipeline gas exports to Europe fell 44% last year to 18 billion cubic meters, the lowest level since the mid-1970s. During the peak period of 2018-2019, this figure was as high as approximately 180 billion cubic meters per year.

The 2022 Nord Stream pipeline explosions further reduced Russia's export capacity to Europe.

However, Peskov emphasized that one of the branches of the Nord Stream 2 pipeline in the Baltic Sea remains fully intact and ready for use at any time, and "can resume operations in a short period of time." He stated that what prevents Europe from using this pipeline is political factors, not technical issues, and the ultimate losers are the European economy and the European people.

Kremlin applies pressure amid rising energy prices

With Europe's energy market under sustained pressure, the Kremlin has clearly stepped up its rhetorical offensive.

Peskov stated that Europe could have turned to cheaper Russian energy early on — whether pipeline gas or LNG — but instead chose to buy at high prices on the spot market, which is self-inflicted harm. "Russian gas, including both pipeline and liquefied natural gas, could have long been the cheaper option."

Notably, the direct backdrop to the high European gas price levels is the impact of the Iran war on global energy markets, with the benchmark European gas price touching €75 per megawatt-hour last week, more than double year-ago levels.

Against this backdrop, Russia's statement that "prices have yet to peak" constitutes a new pressure signal for European businesses and investors who are assessing their winter energy cost exposure.