In Week 49, natural gas prices in the European market experienced a decline, driven by expectations of steady supply through the end of the year. However, prices remained above €45/MWh, and concerns are rising about increased heating demand due to colder weather predicted for January, which could result in higher withdrawals from gas storage. As of October 7, the European Union’s gas storage was 82.38% full, according to Gas Infrastructure Europe.
In the first week of December, TTF gas futures for January 2025 delivery dropped slightly, with prices falling below €46/MWh. On December 2, TTF gas futures reached a weekly high of €48.655/MWh, marking a 1.8% increase compared to the previous week. However, by December 6, the futures price fell to €46.480/MWh, a 0.2% drop from the previous day and 2.8% lower than the previous Friday. Throughout the week, prices continued to decline, with the largest drop recorded on December 4, when prices fell by 3.1% from the day before.
In response to potential supply shortages during the winter, Europe has raised its gas inventory requirements. The EU now mandates a 50% inventory level by February 1, 2025, up from the previous target of 45%. Analysts have highlighted the importance of ongoing LNG imports through January, especially with the anticipated halt of Russian gas supplies starting in January. This strategy is seen as crucial for meeting the winter heating demand.
As of now, the one-month forward contract for TTF gas is trading at €45.750/MWh. The market saw additional price drops after Russia adjusted its gas payment procedures. On December 5, President Vladimir Putin announced a change in how foreign buyers of Russian gas can make payments, alleviating concerns that US sanctions on Gazprombank might disrupt gas flows to Europe. Despite these changes, Gazprombank remains the authorized institution for payments, but now foreign buyers can use third-party banks to convert payments into rubles and transfer the funds to Gazprombank.
While Europe relies on various suppliers beyond Russia, concerns persist as the region has accelerated storage withdrawals this heating season, leaving the market more vulnerable to potential disruptions. Current gas inventories are about 84% full, lower than this time last year. Liquefied natural gas imports have recently increased, helping to alleviate supply concerns. With mild and windy weather forecast for the week ahead, conditions may help reduce fuel demand.
