Gas Prices in Europe Soar Past €30/MWh: What to Expect?

Gas Prices in Europe on the Rise

Gas prices in Europe are currently trading above €30/MWh, marking a 33% increase compared to February levels.
Growing concerns are emerging regarding the replenishment of fuel stocks for the upcoming winter.

Current Situation

Specifically, the European benchmark, the Dutch TTF with June delivery, is priced at €31.05 per megawatt-hour at the time of writing.
According to analysts at ING, European natural gas prices have shown renewed strength and volatility throughout April and early May.

Factors Driving Gas Prices

Several factors are contributing to the rise in gas prices in Europe.
Intense competition with Asia for liquefied natural gas cargoes has put traders in a challenging position.
Decreased LNG shipments to Europe in April, due to more profitable spot prices in Asia, have added pressure to the market.

Moreover, concerns about Russian gas flows through Ukraine are in the spotlight.
A key five-year agreement governing the transit of Russian gas through neighboring countries is set to expire at the end of 2024, potentially impacting supplies to various nations like the Netherlands.

Challenges Ahead

Ukraine has stated its intention not to renew the agreement, posing a risk to approximately 15 billion cubic meters of annual gas supply, equivalent to about 5% of the EU’s total imports.
Additionally, the possibility of a colder-than-average winter has further fueled concerns about gas supplies in Europe for the upcoming season.

Price Outlook

As highlighted by ING strategists Warren Patterson and Ewa Manthey, late cold spells across much of Europe heightened heating demand last month.
Concurrent disruptions in Norway led to reduced flows to Europe.

As a result, European gas storage has remained steady for several weeks, with a filling level of around 62%.
While storage began April at record levels for this time of year, it closed the month in line with 2020 levels, which are still considered comfortable.

Forecast

The TTF gas has decreased by 2.95% since the beginning of 2024.
Analysts predict that the EU’s natural gas TTF will trade at €30.14 EUR/MWh by the end of this quarter.
Looking ahead, expectations point towards €34.95 in 12 months.

ING anticipates a decline in gas prices during the injection season, with an average TTF price expected to be around €25/MWh during the summer months.