TTF prices hover at three-week high

European natural gas futures held firm near a three-week high, trading around €35.5 per megawatt-hour (MWh) on Tuesday, as markets continued to react to tightening supply dynamics and shifting global demand patterns. The recent upward pressure on prices has been fueled by rising Asian LNG demand, particularly across North Asia, where a persistent heatwave is significantly boosting cooling-related electricity consumption.

As utilities in countries such as Japan, South Korea, and parts of China ramp up efforts to secure liquefied natural gas (LNG) for power generation, spot market activity has intensified. This has led to a diversion of some LNG cargoes originally destined for Europe, tightening supply prospects for European buyers.

The competition for LNG cargoes is particularly acute as the global market remains finely balanced, with limited spare production capacity and a continued reliance on floating regasification and shipping availability.

With Europe's gas inventories currently about 62% full, below the five-year average for this time of year, the potential for supply shortfalls ahead of the winter heating season is increasingly on market participants' radar.

To attract LNG cargoes away from Asia, European importers may have to raise bids, especially if Asian demand remains elevated into August. At the same time, domestic demand within Europe is also seeing a temporary uptick, as high temperatures in parts of southern and central Europe boost air conditioning usage and push short-term electricity needs higher.

However, the upside in gas prices may be partially constrained in the coming weeks, with meteorological forecasts suggesting a return to more seasonal temperatures across much of the continent by late July. If realized, this moderation in weather patterns could temporarily ease power demand and slow the pace of inventory withdrawals.

Beyond weather and demand-side pressures, market sentiment is also being influenced by broader macroeconomic and geopolitical concerns. President Donald Trump’s escalation of global tariffs, including his recent announcement of a 30% duty on EU goods and additional levies on copper and pharmaceutical imports, has reignited fears of a slowdown in global economic activity. These developments have tempered some of the bullish momentum in energy markets, as investors weigh the risk that a contraction in global trade and industrial output could eventually dampen energy demand.

In terms of supply outlook, Europe continues to face structural uncertainties related to long-term LNG availability. While near-term flows from Norway and North Africa remain steady, the loss of pipeline gas from Russia and delays in new liquefaction capacity coming online in regions like the US Gulf Coast and Qatar underscore the vulnerability of Europe’s energy security in the medium term.

Looking ahead, traders will be monitoring several key factors, including Asian LNG spot prices, EU gas storage injection rates, weather developments, and any policy signals from Brussels regarding coordinated energy procurement. Any unexpected outages at LNG terminals, shipping bottlenecks, or shifts in Asian buying patterns could further tighten supply and lead to renewed price volatility.

In summary, European gas futures remain elevated as rising competition from Asia and lingering supply risks dominate market focus. While moderating weather could offer short-term relief, underlying structural and geopolitical drivers suggest that energy markets may remain tight and volatile well into the second half of the year.