European GO prices hold rangebound as weak demand offsets drought signal
Soft industrial offtake is preventing European guarantee of origin certificates from pricing in tightening hydrology, traders told Montel on Monday (2026-09-07).
European guarantee of origin prices are not moving on drought signals. Traders told Montel on Monday (2026-09-07) that the seasonal lift in GO values has failed to materialise, even as generators face the prospect of meaningfully reduced hydro output from conditions that resemble the summer of 2022. The demand side is suppressing any price response.5
The hydrology backdrop matters. In 2022, low reservoir levels and reduced run-of-river output forced generators to lean harder on thermal plants, and GO prices responded sharply as the market scrambled to reconcile the physical generation mix with disclosure obligations. The current reluctance to price a repeat suggests traders see this year's demand weakness as the dominant variable, not the physical supply constraint.5
Traders describe a market where sellers with hydro-linked GO volumes are holding inventory but buyers show little urgency to secure forward coverage. Sellers have a hydrology story. Buyers are not listening yet.5
The reason sits in the global gas demand picture. The International Gas Union said on Wednesday (2026-08-26) that global gas demand is set to decline this year for the first time since 2022, following months of disruption to Middle Eastern LNG flows tied to the US-Iran conflict that began in February. The IGU estimated global gas demand will end the year 7 bcm lower year on year, a 0.2% contraction from the record 4,202 bcm set in 2025.3
Weaker gas consumption reduces power-sector offtake and removes certificate demand. If factories are running below capacity and heating demand is muted, utilities need fewer GOs to cover supply obligations and the marginal buyer steps back. The composition of this year's demand softness differs from 2022 in one important respect: in 2022, the demand collapse was concentrated in the power sector, where gas-to-coal switching increased the need for renewable GOs. This year, the hit is in industry, where it removes certificate demand outright rather than redirecting it.5,3
ICE Endex TTF front-month traded at €73.33/MWh, up 1.92% as of Monday (2026-09-07), while THE M+1 was at €74.50/MWh, up 1.75% in the same session. Both moves are driven by LNG supply disruption stemming from the US-Iran conflict, not by any revival in industrial consumption that would pull GO prices higher.3
Across the Atlantic, NYMEX Henry Hub October futures traded at $2.886/MMBtu at 15:46 GMT on Tuesday (2026-09-01), down $0.049 or 1.67%, after failing to hold a recovery that ran into the 50-day moving average at $2.915. Production near 115 Bcf per day remains the reason every rally stalls, even with heat lifting cooling demand and LNG exports pulling cargoes.4
US storage data illustrates the same dynamic. Working gas in storage fell by 52 Bcf for the week, well below the five-year average withdrawal of 168 Bcf for that period, leaving inventories 141 Bcf above the year-ago level, roughly 8% higher. Analysts cited by FX Empire put the national supply cushion at approximately 6.6% above the five-year historical average. Ample supply absorbs weather shocks before they become price events.1,2
Henry Hub's relevance to the European GO story is indirect. It matters insofar as US production levels constrain the Atlantic LNG arbitrage, keeping more supply available to European markets and dampening TTF upside — which in turn limits any power-sector demand recovery that might otherwise tighten the GO market.3,4
Back in Europe, the IGU's demand forecast is the number the GO market should be watching. A 7 bcm annual decline against a record base is modest in magnitude but directionally significant. The last time global gas demand fell on an annual basis was 2022, and that year European GO prices went sharply higher. The difference now is where in the supply chain the demand is disappearing.3
Sellers are watching rainfall forecasts and industrial production indices simultaneously. If the drought persists into autumn and power-sector gas demand surprises upward on a cold start to the fourth quarter, GO prices could gap higher quickly from levels that look cheap against the physical hydrology backdrop. Traders caution, though, that the market has been caught before calling a bottom in certificate demand. No uptick in industrial offtake is visible yet.5
Alpine reservoir levels heading into October are the signal to watch. A second consecutive month below seasonal norms, combined with any upward revision to European gas-for-power demand in the forward curves, would change the calculus for sellers currently content to hold inventory.5