London — The European gas market is bracing for further volatility as it enters the crucial summer restocking season facing tighter global supplies of the liquefied natural gas on which it is now heavily dependent.
Gas demand in Europe rose significantly this winter compared to the previous two years due to colder temperatures, a sharp drop in wind power generation and a recovery in industrial activity.
Consumption in northwest Europe, which includes Germany, France, the Netherlands and Belgium, averaged 7,059 gigawatt hours per day between November 2024 and February 2025, the highest for the period since 2020-2021, according to LSEG data. This is also 11% above the same period in 2021-2022, when demand collapsed as gas prices rallied in the run up to Russia’s invasion of Ukraine.
Combined with the end of imports through the last major Russian gas pipeline, the recovery in demand has led to a rapid drawdown of gas inventories. EU storage is at around 39% of capacity, compared to 63% at the same point last year and 61.5% in 2023 after relatively mild winters.
The end of Russian pipeline supplies, which accounted for 40% of European gas imports until 2022, leaves the region largely dependent on LNG imports, in direct competition with other importers, particularly in Asia.
A steady rise in Europe’s benchmark TTF gas price to a two-year high on February 10 from the start of the year outpaced Asian prices and created a significant arbitrage opportunity, with LNG deliveries into Europe and Britain reaching 9.4 million metric tons in February, the highest-ever for the month, according to data from analytics firm Kpler.
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However, forecasts for warmer weather in Europe, weak Asian demand and signals from the European Commission that it may loosen rigid gas storage regulations have since seen TTF prices drop sharply.
LNG imports in February 2025 hit an all-time high
Gas demand in February rose to its highest since 2021
SUMMER TIGHTNESS
This winter’s rapid depletion of supplies should remain a cause for concern, especially because any change in the requirement for traders to fill storage to 90% of capacity by November is unlikely in the coming months.
Assuming the requirement holds and storage levels drop to a low of 35% of capacity by the end of March, Europe would need 55 billion cubic metres (bcm) of gas to restock, according to Reuters calculations, around 25 bcm more than last year.
That equates to an additional 250 cargoes, or roughly 20 million metric tons, of LNG at a time when global supply appears to be tightening.
Shell, in its latest LNG outlook published in February, said it expects supply to grow by 17 million to 26 million tons this year as new projects come online, mostly in the second half of the year, in the United States, Canada and elsewhere. However, it also expects global demand to grow at a similar rate.
That would leave Europe in a precarious position. Slower-than-expected project ramp-ups, unplanned plant outages or stronger Asian LNG demand would all tighten the market and require Europe to pay more to secure supplies.
In the short term, warmer weather could see prices fall further in the coming weeks, with any removal or lowering of storage requirements extending downward pressure.
Market pricing for now reflects expectations of difficult times ahead. European gas prices for the summer months have traded at a premium to next winter’s price since November, giving buyers no incentive to store gas.
Ultimately, Europe’s dependence on LNG imports means its gas market is now more vulnerable to the vagaries of the international market than it was in the past, meaning greater price volatility may be the new norm.
The opinions expressed here are those of the author, a columnist for ReuterS.
By Ron Bousso
Reporting by Ron Bousso; Editing by Kirsten Donovan
