Europe gas prices to fall throughout 2024 amid high storage levels

Gas prices in Europe could plunge as low as $6.70 per million British thermal units (MMBtu) this summer due to a mild winter and ample gas inventories, Wood Mackenzie has said.

The global provider of data and analytics for the energy transition is also none as Woodmac. It's new report states that gas markets kicked off the current year on a more bullish note as colder weather swept through Europe while industrial demand maintained its recovering trend, increasing 12 per cent year-on-year (y-o-y) in January and around 6 per cent in February.

WoodMac has forecast that household gas demand in Europe will increase by 12 billion cu m (bcm) this year, under normal weather conditions, while industrial demand will grow by 5.5 bcm as the EU economy rebounds in the second half of the year. However, 9 bcm less gas will go into power generation, implying that overall European demand is set to increase by 9 bcm. Still, it won’t be enough to support higher gas prices with storage levels at record highs.

“With storage levels nearing full capacity towards the end of the summer, there will be up to 10 bcm of excess supply that will need to either be piped into underground storage facilities in Ukraine or floated in LNG vessels. This means that a higher summer-winter differential is required to balance the market, compared to what the current forward curve suggests, putting downward pressure on Q3 prices,” Mauro Chavez, Director of Europe Gas & LNG Markets at Wood Mackenzie has said.

With the European gas withdrawal season almost at end, inventories stood at 70.78 bcm on 10 March, higher y/y by 5.61 bcm and 21.41 bcm above the five-year average as per Gas Infrastructure Europe (GIE) data. Commodity analysts at Standard Chartered have predicted that the end-season inventory level will exceed 68 bcm.

Gas prices in Europe remain depressed, with the front-month Dutch Title Transfer Facility (TTF) falling EUR 1.955 per megawatt hour (MWh) to settle at EUR 24.93/MWh on 11 March. That’s  53% lower y/y and 81% lower than two years ago in the immediate wake of Russia’s invasion of Ukraine.