Market Analysis: Gas price volatility continues

A cold spell across northern Europe has seen European natural gas futures push to a one-year high above €49 per megawatt hour (MWh). Across the Atlantic, Henry Hub natural gas futures have also soared in November, finally managing to break above the long-term $3 barrier. The colder weather has been a significant contributing factor to the rise in gas prices but the ongoing geopolitical tensions in Eastern Europe have also been putting upward pressure on prices as they highlight Europe’s energy vulnerability in the post-Russia era. 

That said, both Dutch TTF and Henry Hub prices have declined this week as milder temperatures are expected heading into the next few weeks. Traders in the US have also been taking profits this week ahead of the Thanksgiving holiday. As a result, US gas prices were down over 8% on Wednesday, dropping below $3.20 per Million British Thermal Units (MMBtu). Bearish sentiment may dominate below this level, but buyers are attempting to reverse the momentum at the start of the European session. Reduced trading activity this week could see price stabilise, but it can also ramp up volatility if prices start to move quickly. 

US Natural Gas Futures (XNG/USD) daily chart

Past performance is not a reliable indicator of future results.

In Europe, expected colder weather throughout the winter could see higher demand for heating, tightening prices further. With gas storages having dropped below 90%, Goldman Sachs estimates that heating demand could increase by 46m cubic metres per day, potentially leaving storage at just 40% capacity at the end of March, compared to 53% last year. This has led the bank to revise their 2025 forecasts higher.

In the near term, a colder-than-anticipated winter or further delays in LNG projects that attempt to giver Europe security of supplies could see prices tighten further throughout the coming months, getting closer to €60 MWh. This could have serious ramifications on the European economy as it will increase household energy bills, which could pressure governments to subsidise energy costs. 

Dutch TTF Natural Gas futures daily chart

Past performance is not a reliable indicator of future results.