What is happening with the price of natural gas on both sides of the Atlantic?

Falling natural gas prices are now making headlines, with European benchmark TTF prices dropping below €30/MWh for the first time since the start of the war in Ukraine as Europe did very well to replenish stocks. This brought prices down to their lowest level since June 2021. Since late March, the TTF price has fallen by almost 27% in six consecutive weeks.

The price of natural gas in Europe falls to the lowest level in 2 years

The price of the benchmark TTF fell to EUR 29,75/MWh, i.e. by over 8% to the levels last seen two years ago. The low prices are in stark contrast to last summer, when TTF increased more than ten-fold to a peak of over €2/MWh after Russia cut gas exports to Europe. This decline shows that Europe has overcome the worst effects of supply shortages, at least until now.

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Gas reserves are now well filled

The main reason for the drop in prices is full stocks. Europe ended the winter with gas inventories well above the seasonal average and continues to stockpile. According to the industry association Gas Infrastructure Europe, warehouse occupancy is now close to 65%, almost one-fifth above the five-year average.

Despite the drop in prices, traders and analysts remain cautious as the global gas market still appears volatile. The pipeline flow of Russian gas to Europe, which cannot be diverted to other export markets, is still 90 percent lower than before the invasion of Ukraine. Russia covered about 40 percent of the EU's needs.

The IEA sees an uncertain gas market

International Energy Agency noted in its latest quarterly report on the gas market that the balance between supply and demand for global gas is subject to an extremely wide range of uncertainties this year, from the weather, to the availability of liquefied natural gas (LNG), to the possible further decline of Russian pipeline gas to Europe . Pressure on European and global gas markets has eased since early 2023 thanks to favorable weather conditions and timely policy measures. By the end of the first quarter of 2023, liquefied natural gas (LNG) prices in the European and Asian spot markets had fallen below summer 2021 levels, but were still well above their historical averages. The sharp drop in demand for natural gas reduced the need to withdraw gas from storage facilities in Europe and the US in the winter of 2022/23. As a result, storage facilities ended the heating season with inventories well above their five-year average.

However, the improved outlook for gas markets in 2023 is not a guarantee against future volatility and should not distract from efforts to mitigate potential risks. Global gas supply will remain limited in 2023 and the global balance is subject to an extremely wide range of uncertainties. These include adverse weather factors such as a dry summer or a cold fourth quarter, reduced LNG availability, and the possibility of a further decline in Russian pipeline gas supplies to the European Union.

Nevertheless, even if prices were to rise again next winter, the IEA does not expect them to reach levels close to those of the peak of the crisis.

What could happen to the price of natural gas in the US (Henry Hub)?

Henry Hub's gas price has also fallen sharply over the past 12 months. After a high above $10 per million BTU, the price fell below $1,90 per million BTU. However, since April, the price has bottomed out as it has not fallen below its recent low of $1,90 in May. This was followed by a strong increase in the last few days. This recovery may therefore continue as long as the price remains above $1,90.

Upward targets would therefore be February highs just below $3,00, and then $4,98 as well. However, if the price drops below the $1,90 mark, you can expect to retest the low at $1,40.

Behavior of CFDs on European and US gas over the past three months. CMC Markets platform Next Generation.