A significant premium is a market structure characterized by backwardation, in which short-term contracts are more expensive than contracts with later maturities. Backwardation indicates acute concerns about winter supply.
In Germany m Italy, prices for winter electricity contracts for the fourth quarter of 2026 and the first quarter of 2027 rose more than prices for the full year 2027, indicating concerns about winter power shortages, Reuters reports.
Increased competition between Europe and Asia for flexible supplies, due to their blockage by Hormuz, has made it difficult to rebuild Europe’s gas reserves before winter. Gas stocks are at about 38.2% of filling capacity, well below the typical seasonal level of about 52% and far from the European Union’s target of 90% by November 1, data from Gas Infrastructure Europe show.
Inventory levels are lower than the same period in 2022 when Europe was trying to find alternatives to Russian pipeline gas. The EU deadline for full injection is about 160 days away, so the rate of gas injection will have to almost double to reach the target.
Companies that have said this include Norway’s Equinor. Its executives said this month that Europe could face critical gas shortages if supply disruptions through the Strait of Hormuz continue for another one to three months.
BNP Paribas analyst Jason Ing said European power prices could rise further if the strait remains blocked this summer, gas supplies remain tight and the current water shortage persists. He added that gas prices, which are currently around €46/MWh at the Dutch TTF hub, do not yet take into account the winter premium.
