Natural gas surged further as traders weighed whether Europe’s steps to contain the energy crisis would be enough to stave off rationing and blackouts in the winter. 

Benchmark futures jumped as much as 12%. The European Commission’s radical intervention plan includes raising 140 billion euros ($140 billion) for consumers from energy companies’ earnings, as also mandatory curb on peak power demand and boosting liquidity. But uncertainties remain on how the measures will be implemented as member states are divided and have to sign off on the Commission’s plans. 

A proposal to cap prices of imported gas was ditched for lack of consensus. The plans also didn’t include any solutions on how to add supply to a market that’s been tight ever since Russian shipments were cut. Germany’s energy regulator warned the country may face “waves” of shortages in the event of a cold winter.

“The fact that they’ve gone quiet on the gas price cap is taking some risk out of the market,” said James Huckstepp, head of EMEA gas analytics at S&P Global Commodity Insights. “And the plans to subsidize end-users is bringing demand destruction assumptions into question.”

Focus will remain on storage levels. European inventories are about 84% full, slightly above the five-year average, and at 89% in Germany, according to Gas Infrastructure Europe. Effective demand reduction measures will be increasingly important should there be a situation of acute energy shortage, said Stefan Ulrich, an analyst at BloombergNEF.

Weather forecasts now point for cooler temperatures for the end of September, which is causing some concerns in the market about an increase in demand, analysts at trading firm Energi Danmark said in a note.

“Europe will start seeing some heating demand picking up now,” said Niek van Kouteren, a senior trader at Dutch energy company PZEM NV. “If we do see a prolonged colder period though, that will really start impacting prices, and you might already have to start withdrawing some storages.”

Eight Times Higher

The Dutch front-month gas contract, a benchmark for Europe, was 3.3% higher at 225 euros per megawatt-hour as of 12:08 p.m. in Amsterdam. They rose 14% in the previous two sessions. The UK equivalent increased as much as 1.7%. 

European gas prices are about eight times higher than their typical levels for this time of the year, putting immense strain on the economy and household budgets. Governments are under mounting pressure to act with the official start of the heating season just about two weeks away. 

The high prices have already helped reduce some demand as factories that make everything from metals to fertilizers have cut production. Gas at around 190 euros per megawatt-hour during the winter would be enough to drive an at least 14% demand drop across sectors during the coldest months, according to BloombergNEF’s Ulrich.