Natural gas: the paella of global risks
Jun 30, 2026
Most of today’s global risks seem to sizzle and eventually boil up in the natural gas market. With Hormuz having opened swiftly, the attention moves from geopolitics to summer weather, where climate change undeniably alters the risks.
The Iran war and Qatar’s temporary export impasse brought a supply deficit, which has been filled by a combination of rising exports from elsewhere, demand substituting fuels – particularly within power plants, or pulling supplies from storage – at a much smaller extent compared to oil, however.
Most of these dynamics appear illustratively in Europe. Storage remains in deficit that largely originates from last year. Overseas natural gas imports hold up well and show no meaningful drop over the past months, despite the Middle East’s supply outage.
The weather impact in Europe
The now-ebbing heat wave, however, leaves some marks. With hydro and nuclear power suffering from the heat and drought, natural gas power plants were in use more often than normal, especially during the evening hours.
This additional demand seems to prolong the storage deficit somewhat, namely in France and Belgium. The past weeks’ weather impact on power markets became a hotly commented topic in Europe.
Within hours, markets shifted from abundance around noon to scarcity in the evening, when air conditioners kept humming but the sun set and solar generation dropped. Simultaneously, intraday power prices swung widely, reaching peaks so far only witnessed during cold winter evenings.
The answer may lie in battery storage
These sharp moves up and down the power generation curve likely has already been partially eased by the growth of grid battery storage capacity. With data only partially available, the impact is still difficult to gauge. A look abroad, to Australia or California, where grid battery storage is available at scale, suggests that this phenomenon could disappear as quickly as it appeared.
On the back of significant cost reductions, battery storage has become clean energy’s boom segment, and the early adopters experience lower power prices overall, more reliability, and lower natural gas power generation. With all the attention on data centres, these observations are worth noticing.
Power scarcity is not the issue, but rather adequate alignment of the combo electrification boom on both the supply and demand side of the market. Only where this alignment is mismanaged do grid challenges seem to appear.
Even though the natural gas market should see a similar supply improvement compared to oil and long-term pressure on prices, we stick to our neutral view.
Summer weather risks are here to stay a bit longer. After the summer, Europe’s storage deficit should narrow.
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