European gas prices top 80 euros, hit highest level in 3 years

European natural gas prices topped 80 euros ($93) per megawatt-hour on Wednesday (local time), reaching their highest level in roughly three years since January 2023.

Dutch TTF futures, the European gas price benchmark, rose as much as 6.8 percent during trading that day to 80.99 euros before easing slightly to 79.32 euros by 4:43 p.m., according to Bloomberg. The price still falls short of the peak reached during Europe's energy crisis in the early stages of the Russia-Ukraine war. However, it is more than double what it was just before the outbreak of the Iran war.

Britain's benchmark gas price also climbed as high as 2 pounds ($3) per therm (about 29 kilowatt-hours) that day before pulling back somewhat, marking its highest level since December 2022.

Gas prices have risen as the prolonged Iran war has thrown Middle East gas supplies into crisis, while the fallout from the Russia-Ukraine war has further reduced Russian gas exports. Although Europe sharply cut its demand for Russian gas after the war began, LNG from Russia's Yamal region still accounts for 5 percent of the European market. Ukraine has recently intensified drone strikes on Russian energy facilities and infrastructure, including repeated attacks on the Yamal region.

With winter heating demand approaching, continued disruptions to gas supply have left Europe with unusually low gas reserves. "If the damage to Yamal LNG persists, Europe will face serious supply disruptions and a costly winter unless production resumes in Qatar," said Florence Schmit, senior energy strategist at Rabobank, referring to Qatar as the world's largest LNG exporter.