European gas: Weather brings some relief, but fresh risks emerge – Commerzbank

European Gas Market: Stability Amid Milder Weather and Geopolitical Concerns

According to Norman Liebke from Commerzbank, European natural gas prices have recently steadied, thanks to warmer temperatures that have reduced the need to draw from storage reserves. He anticipates that these low withdrawal rates will likely continue in the near future. Despite this, Liebke points out that replenishing gas storage for the upcoming winter remains a significant hurdle. He also warns that any escalation in tensions between the US and Iran could disrupt the global supply of LNG, potentially causing a sharp increase in TTF natural gas prices.

Weather Eases Pressure, but Geopolitical Risks Persist

With around 20% of the world’s LNG passing through the Strait of Hormuz, any military conflict in this region could have a major impact on gas markets. Although the European Union receives only a small share of its LNG from Qatar—less than 8% of total imports last year and under 5% in January, according to Bruegel—disruptions in this shipping route could still affect supply.

Such interruptions would intensify competition among buyers, forcing European customers to pay more to secure LNG deliveries. This situation would be especially challenging given the already low gas storage levels across the EU, particularly in Germany, making any supply shock even more problematic. As a result, a military conflict could trigger a significant spike in TTF natural gas prices.

Recent Trends and Future Challenges

Recently, European gas prices have found stability, largely due to forecasts predicting warmer weather and a subsequent drop in withdrawals from storage facilities. The ECMWF’s two-week outlook suggests temperatures well above the 30-year average. As a result, gas withdrawals have decreased considerably compared to earlier periods of high demand caused by cold weather.

Despite these short-term improvements, the main challenge ahead is ensuring that gas storage facilities are adequately refilled before the next winter season.