On September 9, TTF gas futures peaked at €37.33/MWh, driven by forecasts of cold weather and reduced supply from Norway. As the second week of September began, concerns over Hurricane Francine’s impact on US liquefied natural gas exports also pushed prices higher. Despite this, robust European reserve levels and ample supply kept settlement prices below €38/MWh during the week.
By Tuesday, European benchmark natural gas prices had dropped to €35.28/MWh as the arrival of a mild cold wave increased wind energy production, reducing the demand for gas in electricity generation. This marked the first daily decline in four trading days, as higher wind output alleviated pressure on gas supplies.
However, the onset of autumn temperatures in Europe could lead to increased gas demand in the coming days amid supply constraints, particularly due to maintenance at some Norwegian export facilities and rising LNG prices in Asia, which are diverting cargoes away from Europe. The strong demand for liquefied natural gas in Asia is drawing more supply to that continent, resulting in lower availability for Europe, where prices are discounted compared to spot Asian prices.
Meanwhile, Hurricane Francine weakened to a tropical depression after making landfall in southern Louisiana, causing power outages but leaving fuel flows stable at the eight operational US export facilities. The Cameron LNG plant was reportedly unaffected. European gas storage levels remained reassuringly high at 93% full, according to Gas Infrastructure Europe, although these reserves won’t meet all winter needs, prompting traders to monitor potential supply disruptions.
The European gas market is expected to experience volatility in the coming days due to concerns over supply and the potential for increased demand if wind power generation in Northern Europe falters. The market remains sensitive to supply issues, having become increasingly reliant on global flows since the energy crisis. A sudden increase in gas usage in Europe or Asia due to cold weather could drive prices higher, particularly with the upcoming expiration of the gas-transit agreement between Russia and Ukraine, which may halt flows on January 1.
As of the latest reports, the one-month forward contract at TTF was trading at €35.547/MWh. A recent European Union report titled “The Future of European Competitiveness – Part A | A Competitiveness Strategy for Europe” emphasizes that natural gas will remain part of Europe’s energy mix in the medium term. Projections indicate that EU gas demand may decrease by 8% to 25% by 2030, highlighting the need to reduce price volatility.
The report advocates for reinforced joint procurement, particularly for LNG, to enhance Europe’s market power and establish long-term partnerships with reliable suppliers as part of a comprehensive EU gas strategy. It also suggests decoupling the remuneration of renewable energy and nuclear power from fossil fuels, utilizing mechanisms introduced in the new Electricity Market Design, such as Power Purchase Agreements (PPAs) and two-way Contracts for Difference (CfDs).
Part B of the report notes that while the EU is the largest global importer of gas and LNG, it has not effectively leveraged its collective bargaining power. This is particularly evident in pipeline gas trade, where rerouting options are limited. Total EU gas imports fell from 334 bcm (93% of its needs) in 2021 to 290 bcm in 2023, with Russian imports plummeting from 40% in 2021 to just 8% in 2023. Despite these shifts, gas purchases in the EU are conducted by numerous public and private entities without effectively harnessing Europe’s market strength.
