European natural gas prices have climbed to their highest level in nearly four years, while inventories heading into winter remain below seasonal norms. The supply picture is drawing attention to LNG as buyers in Europe and Asia compete for cargoes. In contrast, U.S. natural gas futures remain near a one-year low. Energy stocks have led the S&P 500’s sectors this year, yet the group still trades at the market’s lowest valuation, with several gas-related shares described as nearing technical buy zones.
European gas tops €97 for the first time since December 2022
European gas prices rose above €97 per megawatt-hour, equivalent to about $28.50 per million British thermal units. It was the first time prices had reached that level since December 2022. European and Asian buyers are competing for LNG, with a substantial share of supply coming from U.S. producers. The competition highlights how regional supply conditions and price differences can shape the market for energy companies.
LPL Financial said earlier this month that European gas inventories were 20% below the seasonal average as the region entered winter. Colder-than-expected weather could lift heating demand further, though no specific forecast for subsequent weather or supply changes was provided.
U.S. futures remain close to a one-year low
The U.S. market is moving in the opposite direction. Natural gas futures settled at $2.60 per million British thermal units on Monday, just above their low for the past 52 weeks. The rise in European prices has not ended the low-price environment in the United States, underscoring the differences in regional supply, demand and pricing.
U.S. LNG producers operate within a cross-border supply chain, and competition from European and Asian buyers adds a new demand backdrop. But subdued U.S. futures prices show that strength in Europe does not necessarily translate into a stronger U.S. gas market. Stock performance also depends on each company’s business and how market prices evolve.
Energy leads S&P 500 sectors but retains lowest valuation
For the year through the weekend ending October 24, the S&P 500 energy sector had gained 55.1%, the strongest performance among the index’s 11 sectors. Yardeni Research put the sector’s expected earnings growth at 76.5%. Despite the gains in share prices and earnings expectations, energy traded at a forward price-to-earnings ratio of 13.8, the lowest among the major sectors.
High European gas prices, lean inventories and competition from Asian buyers have added new variables for the gas supply chain, while U.S. futures remain near a one-year low. The sector’s year-to-date gain and valuation provide broader market context, but the fact that several gas stocks are nearing technical buy zones does not mean companies face the same supply, demand or earnings conditions.