Europe's main natural gas price benchmark, the Dutch TTF futures, is climbing toward multi-year highs despite recent geopolitical developments. This surge comes as Europe prepares for winter without Qatar's liquefied natural gas (LNG) exports and with storage levels significantly below the 15-year average. As of now, Dutch TTF futures are trading around 83 euros per megawatt-hour, the highest level since early 2023, following a brief dip to around 70 euros in September.
Despite the absence of Qatari LNG exports, Europe has been injecting gas into storage at a faster-than-expected rate. Storage levels reached 73.1% on October 7, surpassing earlier expectations that storage might not reach 70% before winter. Citi analyst Maggie Xueting Lin noted this progress but cautioned that EU gas storage levels remain well below seasonal norms, with the 15-year average around 90%.
Several factors are easing Europe's natural gas balance ahead of winter, including industrial demand destruction, warm weather, and an unexpected shift in Ukraine's role. Industrial gas demand fell about 8% year over year in September and remains nearly 30% below pre-2022 levels. Ukraine is also providing unexpected relief by potentially re-exporting as much as 1 billion cubic meters this winter, which could loosen Europe's winter balance by 4.5 billion cubic meters compared to last year.
Citi's Lin maintains a bearish outlook on EU natural gas prices, forecasting a fourth-quarter TTF base case of 56 euros. She believes that industrial demand destruction is mitigating the natural gas shortage despite continued disruptions to Qatari LNG exports. However, Goldman commodities expert Samantha Dart previously suggested that prices would need to rise near 100 euros to discourage Asian LNG demand and free up additional cargoes for Europe.