European natural gas futures dropped 3% to €44.2/MWh on Tuesday, as forecasts for warmer weather pointed to reduced heating demand across the region.
TTF prices fall on Tuesday
Milder temperatures in the coming days are expected to ease pressure on gas consumption, helping maintain healthy storage levels as Europe transitions into the spring season. However, market participants remain cautious due to ongoing geopolitical risks, particularly surrounding US-Ukraine relations and broader trade tensions.
While temperatures are set to rise above seasonal norms this week, a colder forecast for early next week introduces some uncertainty and the potential for short-term price rebounds. Additionally, energy traders are monitoring potential supply disruptions, as Europe remains heavily reliant on liquefied natural gas (LNG) imports to compensate for reduced Russian pipeline flows. In February, Europe absorbed the bulk of US LNG exports, with demand fueled by persistent cold weather, weaker wind energy output, and constrained Russian gas supplies.
Cold snap could drive renewed demand
Despite a recent slowdown in gas withdrawals due to warmer conditions, a potential cold snap later in March could drive renewed demand, testing Europe's storage capacity as the heating season winds down. Market volatility is also being influenced by global trade developments, as new US tariffs on Canada, Mexico, and China raise concerns about broader economic implications, potentially affecting industrial gas consumption.
Uncertainty stems from tariffs
Further uncertainty stems from the decision by US President Donald Trump to halt military aid to Ukraine, a move that has raised concerns about potential shifts in geopolitical alliances and energy security in Eastern Europe. Traders are keeping a close eye on how these developments might impact LNG flows and the broader European energy market, as any disruptions could quickly reverse the recent downward trend in gas prices.
