European gas futures jumped the most since March 2023 amid signs of a tighter liquefied natural gas market and potentially stronger Asian demand for the fuel. 

The benchmark month-ahead Dutch contract settled 20% higher at €28.48 a megawatt-hour, after skidding to the lowest level in two years the week of June 2. The U.K. equivalent soared by 22%. The surge could signal the bottom of the market has been reached for now, with traders moving quickly to build positions.

“A perfect storm hit gas hubs June 5,” said Tim Partridge, director of energy markets at utilities consultancy Eyebright Ltd. Factors behind the day’s move include an ongoing outage at the Norne field in Norway, bullishness filtering through from Saudi Arabia’s pledged oil-supply cuts, and U.S. shipments of LNG favoring Asia over Europe. 

The region is still recovering from a historic energy crisis exacerbated by severe supply cuts from Russia in the wake of its war in Ukraine. Europe has amassed higher-than-usual inventories, due to a relatively mild winter, record imports of LNG and tepid demand. 

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Still, traders are mindful of persistent risks, including the possibility of even lower Russian supplies and competition with Asia for LNG. U.S. shipments of the fuel — vital for Europe’s energy security — are currently more profitable to Asia in July, August and September, according to BloombergNEF.

Saudi Arabia, on June 4, agreed to curb crude supply further in July 2023 to help shore up sagging oil prices. Long-term LNG contracts are often linked to oil, meaning buyers may prefer spot shipments for now.

Coal futures for 2024 jumped 12% to $108 per ton. Utilities often switch between using gas and coal to produce power as a source of stable generation, with tighter supply of one fuel often lifting the price of the other.

“All at once we have risks on a few sides pop up today and the downtrend we’ve been enjoying is looking to falter,” Partridge said, referring to gas. “Where markets open June 6 will go a long way in setting the tone.”