European natural gas prices began to fall in mid-September 2024, following a more than 20% drop in U.S. liquefied natural gas (LNG) exports to the region. This decline came as European demand for LNG stabilized after a period of heavy reliance on U.S. supplies to replace Russian gas. On September 16, Dutch TTF gas futures were priced at €34.08 per megawatt-hour for October contracts, a significant drop from earlier peaks.
Earlier in September, however, natural gas prices had surged. TTF month-ahead prices rose by 20%, surpassing $12 per million British thermal units (MMBtu), reaching their highest average since November 2023. This spike occurred despite weak demand, with EU storage levels above 92% and strong Norwegian pipeline flows ensuring supply. The increase in prices was mainly driven by geopolitical tensions, particularly conflicts in the Middle East and ongoing issues along the Russian-Ukrainian border, especially at the Sudzha gas interconnection point. These factors sparked market speculation about potential supply disruptions.
In August, TTF prices remained above €40 per megawatt-hour due to rising concerns about possible interruptions in Russian natural gas pipeline flows through Ukraine. While these flows are stable for now, uncertainty remains regarding the expiration of the current transit agreement in December 2024 and ongoing maintenance in Norway, which has reduced natural gas flows. Experts emphasize the need to maintain high storage levels and a steady supply from Norway and LNG sources to ensure security during the winter months.
Despite the price drop in mid-September, concerns linger about future supply and demand. European countries have increased their LNG import capacity by 23% since the Russia-Ukraine conflict began in 2022. However, natural gas consumption in Europe is declining, with a 5.4% year-on-year decrease in the first half of 2024. This has led to underutilization at many LNG import terminals, with the average utilization rate dropping from 62.8% in the first half of 2023 to 47.2% in the same period of 2024, as reported by IEEFA.
The situation is further complicated by rising competition for LNG, particularly from Egypt, which plans to buy 20 LNG cargoes starting in October. This new demand intensifies market competition ahead of the winter season. Geopolitical uncertainties continue to keep the natural gas market on edge.
Overall, the early September surge in European natural gas prices was fueled by geopolitical tensions and tight supply conditions, while the mid-month decline resulted from reduced U.S. LNG exports and stabilized demand. As stakeholders prepare for the winter heating season, the European natural gas market remains volatile, requiring careful monitoring of supply dynamics, geopolitical developments, and consumption trends.
Looking forward, the market will continue to be influenced by global supply disruptions, weather patterns, and the ongoing shift toward renewable energy sources. Stakeholders must stay alert to navigate the complexities of the evolving European natural gas landscape as winter approaches.