European Gas Market Dynamics: Rising Prices Amid Supply Concerns

As of June 1, 2024, European gas storage facilities were over 70% full, marking the second-highest level recorded for this time of year, according to the AGSI platform. However, despite this healthy storage level, the European gas market remains highly sensitive to various influencing factors.

In May 2024, Russian gas exports to Europe via pipeline saw a significant increase, rising 39% year-on-year and 7.3% month-on-month to reach 89.5 million cubic meters. Despite this growth, the market remains uncertain about the sustainability of this trend, especially with potential disruptions looming.

At the same time, Austrian energy company OMV recently warned that Gazprom might halt gas deliveries to Austria due to legal issues surrounding payments to Gazprom Export. This warning followed a court ruling favoring a large, unnamed European energy company, which redirected payments from an Austrian buyer.

On May 23, TTF gas futures peaked at $38.22/MWh, the highest price since December 2023. Although prices dropped to $36.7/MWh on May 24, they remained 11% higher than the previous week.

Unplanned supply disruptions from Norway have also caused sharp market reactions. On June 3, a malfunction at Norway’s Nyhamna gas processing plant pushed TTF prices above $40.9/MWh, the highest level seen this year, before settling at $39.6/MWh. Norway, currently Europe’s largest natural gas supplier, accounted for 30% of the EU’s supply last year.

In addition to Norwegian supplies, Europe heavily relies on LNG imports from the United States and Qatar. U.S. gas prices dropped by one-third this year due to a warmer winter, disruptions at LNG facilities, and higher-than-expected production.

In May, U.S. LNG imports to Europe declined as high temperatures increased demand in Asia, intensifying competition for LNG cargoes. To secure these shipments, European gas prices must stay elevated, ensuring the region remains an attractive market for LNG suppliers.

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