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Natural Gas: Prices Could Test Last Year's Lows on Ample Storage, Warm Weather

Published 22/02/2024, 11:07
Updated 02/09/2020, 07:05
  • Demand for natural gas in Europe is falling, and a peak in LNG prices is on the horizon.
  • Warmer-than-expected winter, and increased supply diversification favor price declines as well.
  • As a result, bears could be targeting the lows near the 20 euro price level.
  • In 2024, invest like the big funds from the comfort of your home with our AI-powered ProPicks stock selection tool. Learn more here>>

Europe can breathe a sigh of relief as indications suggest that the continent might not face supply issues in the next winter.

The gas market reflects this situation, with the Dutch TTF futures trending downwards towards last year's lows, which lies just above 20 euros per MMBtu.

A warm second part of the heating season and forecasts of relatively high temperatures in the coming months further favor the European economy.

Increased diversification of supply has aided this, which made sure that the continent isn't depending on Russian gas alone.

Natural Gas Continues to Be a Vital Component of the European Energy Mix

The broader European economy, particularly European Union countries, has successfully reduced natural gas consumption by about 20% between 2021 and 2023.

Germany has led with a 17.6 billion cubic meter drop in demand, contributing to the overall European consumption of 452 billion cubic meters.

Factors include widespread energy savings in industrial production, higher average temperatures, and an increase in renewable energy use.

LNG imports by sea, especially from the US, Qatar, and Russia, have seen a notable increase. Europen gas demand is estimated to peak in 2025, after which it is expected to consistently decrease in favor of renewable energy sources (RES).

The US administration has recognized this trend, halting further export licenses due to the fear of declining European demand.

What's Behind the Recent Decline in Prices?

The recent decline in natural gas prices at the Dutch TTF hub in the new year is influenced by two key elements.

Firstly, data show that France and Germany are experiencing some of the warmest winters in the last 34 years.

Additionally, deliveries from the Troll field in Norway and a storage facility average fill of 67.87% should prove useful in the next few months.

Barring potential supply-chain disruptions, there are no significant factors on the horizon threatening a return of the energy crisis threat in Europe.

The clear downward trend in natural gas prices at the Dutch TTF hub is excellent news for the European economy.

Overcoming last year's low, which is located at around 23 euros per MMBtu is the key focus for bears.

Technical View

If the bearish scenario occurs, prices may drop to around 20 euros per MMBtu, returning to pre-Ukraine war levels.

Dutch TTF Natural Gas Futures

Considering the aforementioned factors, the bearish scenario is highly probable.


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