Europe’s main natural gas price benchmark is headed for multi-year highs despite the reported Russia-Ukraine energy ceasefire and improving Strait of Hormuz energy flows. Dutch TTF futures trade around 83 euros per megawatt hour, the highest level since early 2023, after a September pullback to around 70 euros proved short-lived. Europe is heading into the Northern Hemisphere winter without Qatari LNG exports and with storage levels well below seasonal norms.
Citi analyst Maggie Xueting Lin noted that Europe is injecting gas into storage at a faster than expected pace, with storage over 73 percent full despite earlier expectations of not getting to 70 percent before winter starts. Storage reached 73.1 percent on October 7, and September injections were the strongest for that month since 2022. EU storage levels are still well below the 15-year average of around 90 percent.
Citi identified three factors easing Europe’s gas balance ahead of winter: industrial demand destruction, warm weather, and an unexpected shift in Ukraine’s role from net importer to net exporter. Industrial gas demand fell about 8 percent year over year in September in Citi’s six-country sample and remained nearly 30 percent below pre-2022 levels, with evidence of additional price-driven curtailment after adjusting for warm weather. Ukraine could potentially re-export as much as 1 billion cubic meters this winter, loosening Europe’s winter balance by 4.5 billion cubic meters versus last year.
Lin is bearish on prices despite the highs, maintaining a fourth-quarter TTF base case forecast of 56 euros per megawatt hour, arguing that industrial demand destruction is easing the shortage created by continued disruption to Qatari LNG exports. In late August, when TTF traded around 67 euros, Goldman Sachs analyst Samantha Dart said prices would need to rise near 100 euros to discourage Asian LNG demand and free incremental cargoes for Europe.