European natural gas prices have strengthened over the summer amid heightened geopolitical tensions, and the trend could continue through the coming months.
According to analysts at BofA Global Research, a warm winter “left the global gas market swimming in inventory for the second consecutive year in 2024.” But since February, Title Transfer Facility (TTF) prices have doubled, they said.
September TTF closed at $12.54/MMBtu on Wednesday, down about 2% from Tuesday. It was falling again on Thursday.
“As global gas balances tightened, the TTF forward curve increased through winter 2025/26, while the winter-summer spread flattened, likely reflecting the risk of disrupted Russian gas flows to Europe and tighter balances as a result,” they said.
The analysts warned of risks going forward and the potential for higher prices this winter than each of the two previous winters. “Even if storage hits prior October highs, Europe faces the risk of lost Russian supply in January and a normal or colder winter, but unlike last year, the market will be without Ukrainian auxiliary storage,” the analysts said.
They added that “excess storage in Ukraine for European usage will not be there this year due to lack of financial incentives and perhaps due to concern that energy assets are now being targeted in the war.”
Also, France’s nuclear fleet continues to face issues, and some reactors could see maintenance extended into fall or winter, leading to more natural gas-fired generation.
Jefferies analysts on Wednesday said they saw near-term prices reflecting heightened geopolitical risks. Ukrainian incursions into the Kursk region, where the Sudzha gas metering station is located, could cause an early halt of Russian pipeline gas exports. These are currently still flowing at around 40 Mm3/d.
Analysts also believed the European Union plan of replacing Russian gas exports via Ukraine pipelines with gas from Azerbaijan “will be difficult to achieve in the physical market due to the lack of export capacity.”
The escalating risk of war in the Middle East is also a factor that could hit global natural gas prices.
Meanwhile, LNG project delays such as at Golden Pass could further tighten the market, Jefferies analysts said. The 18 million metric ton/year (mmty) Golden Pass Terminal LLC project, a joint venture between ExxonMobil and QatarEnergy has faced several delays over contractor issues, but LNG production is now expected to start around the end of 2025, according to ExxonMobil management.
LNG Supply Boom
LNG supply growth this year was the lowest in 10 years, rising 3-4 million metric tons (mmt) year/year (y/y), according to BofA Global Research. But a glut of new supply could change that picture very quickly.
Nearly 40 million mmt of LNG capacity is expected to come online annually between 2026 and 2028.
That would push the world’s liquefaction capabilities well north of 500 mmty and far surpass each of the previous two supply cycles dating back to 2009. The market currently consumes about 400 mmty.
But longer term, some bullish trends also bode well for global gas prices, BofA analysts said. Power generation in India has risen rapidly in recent years. Year-to-date, thermal generation, which includes coal and gas, has grown 11% y/y. India’s LNG imports are tracking nearly 4 mmt higher y/y.
Low hydrology in Brazil is supporting higher LNG imports. Meanwhile, a hot summer has led to higher power burns in China, analysts said. They added that natural gas used in cars and trucks in China is pushing up demand for LNG.
China could add more than 80 mmt of regasification capacity during 2025-26 if all terminals are commissioned on time, the analysts said.
