During Week 48 of 2024, natural gas prices in Europe saw an upward trend, with some fluctuations, driven by a cold weather spell in November that led to earlier-than-usual inventory drawdowns. TTF gas futures for contracts set for January 2025 experienced a notable increase, surpassing €46/MWh throughout the week. On Monday, November 25, TTF futures reached their highest weekly settlement price of €48.23/MWh, marking a 2.6% rise from the previous week’s closing price. However, by Thursday, November 28, prices dipped to their weekly minimum of €46.68/MWh, which was 2.6% lower than the day before. Afterward, prices resumed their upward trajectory, with the second highest weekly settlement price of €47.81/MWh reached on Friday, November 29, reflecting a 1.7% increase from the previous Friday.
The price surge was fueled by expectations of increased demand as colder temperatures in December loomed. Moreover, European natural gas reserves were reported to be lower than last year, adding to concerns about supply. The competition for LNG (liquefied natural gas) also intensified, particularly as Asia’s demand for LNG increased, further tightening the European market. Consequently, TTF gas futures rose amid these conditions.
A cold snap across northern Europe helped push European natural gas futures to a one-year high above €48/MWh. The colder weather played a crucial role in the rise of gas prices, but ongoing geopolitical tensions, particularly in Eastern Europe, have also contributed to the upward pressure, emphasizing Europe’s energy vulnerability in a post-Russia gas supply era.
As of the latest update, the one-month forward contract for TTF was trading at €47.68/MWh. Europe’s natural gas market had been on edge for weeks, particularly with the onset of the winter heating season, a lull in wind speeds in northwestern Europe, and a dispute between Austria’s OMV and Russia’s Gazprom over gas deliveries. Furthermore, the gas transit deal via Ukraine, which expires on December 31, 2024, is set to end, and Ukraine has stated it will not renew the agreement with Russia. These factors combined have led Dutch TTF natural gas futures, the benchmark for Europe’s gas trading, to hit a two-year high by the end of last week.
Global natural gas markets have also been tightening this heating season, contributing to higher LNG supply costs to Europe. In particular, LNG imports to Europe have increased, especially from the United States, where benchmark gas prices at Henry Hub are significantly lower than Europe’s TTF futures. As winter approaches and peak demand season in the northern hemisphere begins, Europe is in direct competition with Asia for LNG supply. This competition has driven prices up, with some LNG shipments initially destined for Asia being diverted to Europe, where prices are currently higher. According to vessel-tracking data from Vortexa, at least 11 LNG cargoes have been redirected from Asia or Egypt to Europe in recent weeks.
In addition to the rising LNG prices, weather forecasts predict a colder winter in the northern hemisphere, with potential shifts from El Niño to La Niña patterns, which typically bring colder, drier weather to much of the Northern Hemisphere. The last two winters were relatively warm, leading to lower natural gas consumption in Europe, higher storage inventories, and consequently lower gas prices. However, this winter is expected to be different, with Europe facing increased LNG demand amid uncertainties surrounding the Russian pipeline gas supply after January 1, 2025.
The combination of factors – colder weather, increased demand, geopolitical issues, and the continuing shift in global LNG markets – is contributing to higher natural gas prices in Europe as the continent heads into the winter season.
