Speculation or Fundamentals? European Natural Gas Price Swings Post 2020

We investigate the role of speculation in the European natural gas market over the period 2020-24, a period marked by extreme price volatility driven by the energy crisis following Russia's invasion of Ukraine. Replicating the framework of Knittel and Pindyck (2016), we disentangle the contribution of speculative activity from that of market fundamentals using data on production, consumption, inventories, spot prices, and convenience yields across four distinct phases of the crisis. We find that speculation accounts for only a modest fraction of observed price movements in all periods, with market fundamentals--particularly supply disruptions and policy driven storage dynamics--remaining the dominant drivers throughout. The speculative component is largest during Phase 1 (April 2021-February 2022), though a large speculative component indicates only that the model cannot exclude speculation as a contributing factor, not that it was responsible for it. The concurrent inventory drawdown and rising convenience yields point instead to genuine supply scarcity as the primary force. In Phase 3 (June 2022-September 2022), the clearest speculative signal is likely attributable in part to EU-mandated storage filling rather than profit-motivated hoarding, a distinction the framework cannot resolve. Across the price cycle, speculation appears to have modestly amplified the run-up and dampened the collapse, consistent with a stabilizing rather than destabilizing role, even during a crisis of the severity experienced in European natural gas markets.