Natural gas prices have surged recently in all major consuming markets, including the United States, where prices have skyrocketed by over 160% compared to the same time last year.
Colder winters in North America and Europe have wiped out all surplus inventories built up during the previous two milder winters.
In Europe, the halt of Russian gas transit via Ukraine on January 1st forced the continent to purchase more LNG and prepare for a more intense refill season between April and October, with inventories now about 35% lower compared to February 2024.
In the United States, cold snaps in January and February increased the demand for heating and power generation. This higher consumption, combined with reduced output from recent months when natural gas companies were curtailing production in response to historically low prices early last year, added to the price surge. Record gas flows to LNG export plants and above-average withdrawals from storage have also fueled the natural gas price rally.
Looking ahead, prices in both the U.S. and Europe are expected to stay high even after the heating season ends in the northern hemisphere. Europe will need to stock up significantly ahead of next winter, and much of this will come from LNG imports, mostly from the U.S.
Dutch TTF Natural Gas Futures, Europe’s gas trading benchmark, eased in the past week but hit a two-year high earlier this month. The first real winter in Europe with prolonged cold spells since the 2022 energy crisis is depleting EU stockpiles of natural gas, which have dropped to their lowest level for this time of year since the crisis.
Europe’s gas prices remain high, despite the recent pullback, as there is ongoing speculation about the end of the war in Ukraine. Prices in the forward curve for the summer months are also much higher than in the past two years due to depleted stocks, requiring more effort to refill storage ahead of the 2025/2026 winter.
As of February 22, EU gas storage levels were 40% full, according to Gas Infrastructure Europe. This is much lower than last year’s 60% full storage capacity at the same time.
Higher-than-usual demand in Europe to refill inventories by November 1, 2025, is expected to support prices through the summer, maintaining the current tightness in global natural gas markets.
“Meeting EU targets for filling storage before the start of next winter will require much bigger inflows of gas than in the previous two years, increasing Europe’s reliance on global LNG markets and tightening market fundamentals,” said the International Energy Agency (IEA) in a recent commentary.
In the U.S., natural gas prices have surged this year due to Arctic cold snaps and larger-than-usual withdrawals from storage. Extremely cold temperatures have also caused freeze-offs in some gas-producing regions, further tightening the supply-demand balance. Coupled with record-high LNG exports, natural gas has become the hottest commodity in the U.S. so far this year. Over the past year, natural gas prices have risen 160% since February 2024, with most of the increases occurring in the past three winter months.
Net withdrawals from storage have been above average in recent weeks, and by the week ending February 19, working natural gas stocks were 5% lower than the five-year average and 16% lower than last year at this time, according to the latest weekly data from the U.S. Energy Information Administration (EIA).
Due to increased consumption and relatively flat production for the rest of Q1 2025, the EIA expects natural gas inventories at the end of the withdrawal season on March 31 to be 4% below the five-year average.
This would provide additional support to natural gas prices, which would benefit gas producers looking to increase output after a year of curtailments due to the multi-year low prices of 2024.
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