In the final days of January 2025, European natural gas prices surged to a 15-month high, driven by dwindling inventories and concerns over future supply disruptions. TTF gas futures for March 2025 delivery, traded on the ICE market, saw a notable increase compared to the previous week, surpassing €47/MWh throughout the week. From January 29 onwards, prices rose above €50/MWh, marking a sharp upward trend.
On Monday, January 27, TTF gas futures reached their weekly low of €47.95/MWh, down 3.6% from the previous week’s close but still 0.4% higher than the Monday before. By Friday, January 31, however, the futures price had risen to €53.24/MWh, reflecting a 7.1% increase from the previous Friday and a 3.5% climb from the day before.
The sharp rise in prices on January 31 was attributed to a combination of factors, including unexpected disruptions in supply, as well as forecasts for colder weather, which fueled concerns about the already tight market. TTF front-month futures jumped over 6%, closing above €51/MWh on January 29, driven by fears of volatile liquefied natural gas (LNG) supplies following issues at several export facilities.
Further compounding the situation, heating demand is expected to rise as temperatures drop in the coming days. The increase in carbon prices has also added upward pressure on gas prices. As of late January, European gas storage was at just 55% capacity—significantly lower than last year’s 72% and well below the five-year average of 62%.
Beyond weather concerns, traders are also keeping an eye on developments in Ukraine, where Naftogaz, the state gas company, is looking to import gas for the first time this winter. While the volume remains unclear, it is speculated that Naftogaz could be seeking up to 3 billion cubic meters (Bcm) in preparation for the next heating season. Meanwhile, the breakaway region of Transnistria is expected to start receiving 2-3 million cubic meters (Mcm) of gas per day starting in February. The exact supplier remains unclear, but this will further tighten supply in Eastern Europe, especially as Russia halts its gas transit through Ukraine.
By the time of publication, the one-month forward contract for TTF gas was trading at €52.75/MWh. European gas storage withdrawals have surged to their second-highest level in the last decade, with stocks now 15 Bcm lower than the same time last year, signaling a tighter market for the upcoming summer. EU gas storage withdrawals have reached over 27 Bcm since the start of the heating season, which is 75% higher than last year and 35% above the five-year average.
Several key factors have contributed to this significant draw on European gas storage:
- Higher gas demand: European gas consumption rose by 9% year-on-year (YoY) in the fourth quarter of 2024, driven by colder weather and a slowdown in wind energy production, which increased reliance on gas-fired power.
- Lower LNG imports: LNG imports into Europe continued to decline, down more than 10% YoY, amid limited growth in LNG supply and strong competition from Asia.
- Declining production: European gas output dropped by nearly 7% in 2024, primarily due to rapidly decreasing production rates in the North Sea.
- Piped gas limitations: European piped gas supplies remained less responsive to increased demand. Additionally, Norwegian gas supplies dropped in December 2024 due to unplanned outages at key processing facilities.
The halt of Russian gas transit through Ukraine is expected to further accelerate storage withdrawals in the first quarter of 2025, particularly in Austria and Slovakia. This winter’s significant drawdown in storage will likely result in increased demand for gas injections during the summer of 2025, potentially adding 15 Bcm more to storage than last year.
