European Natural Gas

Gas reserves in Europe are below the levels of the 2021/2022 crisis, with Germany at 61% and the Netherlands at 65%, and prices could rise if those two countries are forced to buy at any price. Anyone investing in a gas ETF in euros can benefit from backwardation, but it is a volatile product and not suitable for every investor profile.

Europe's natural gas reserves are slightly below the levels they reached during the 2021/2022 gas crisis. The difference is that several countries, especially **Germany** and the **Netherlands**, have barely filled their storage facilities. The fill level is **61%** in Germany and **65%** in the Netherlands, compared with **79%** in Spain, **87%** in France, **90%** in Italy and **99%** in Poland.

## A winter with half-full storage

The figure matters because Germany and the Netherlands are the continent's two major industrial consumers and the ones that need the most gas to get through the winter. With storage at these levels, any prolonged cold snap or supply disruption forces them into the market to buy. And if they buy late, they pay a high price.

The situation recalls **2021**. Back then, prices started rising in **September** and, somewhat counterintuitively, peaked not in winter but in **August of the trinc year**. The lesson from that episode is that the gas market does not always tighten when it is cold: it tightens when storage enters the heating season without a comfortable margin.

## Why prices could rise even if there is peace

The reasoning circulating among investors is that even if the Iran war ended tomorrow, the upward trend and the imbalance between countries would remain. Germany and the Netherlands would have to pay whatever it takes for gas to complete their reserves before winter. That demand pressure on a supply that comes largely from the Middle East is what underpins the argument.

## Backwardation and the euro-listed ETF

Anyone wanting exposure to gas without buying futures has a specific vehicle: the **WisdomTree European Natural Gas (TTFW)**, an ETF listed in euros. Its appeal in such a scenario is **backwardation**, which means that futures contracts further out in time trade at higher prices than the next month's contract. That differential can work in the product's favour if the market stays tight.

It is not a comfortable bet. Gas is one of the most volatile commodities there is, and a futures ETF does not replicate the spot price: it rolls contracts and can lose money even when gas rises. Before investing in such a product, it is worth understanding how it works and consulting a financial adviser.