Tightening Natural Gas Market in Europe for Winter 2024-25

As Europe approaches winter 2024-25, analysts at Bernstein observe that the natural gas market is tightening due to various supply and demand pressures, further complicated by the potential effects of a second Trump presidency.

The European gas benchmark, TTF, has surged nearly 30% year-to-date, bringing January 2025 prices to approximately $12.4/mmBtu, which is close to Bernstein’s long-term forecast of $11.60/mmBtu.

This price increase reflects several issues, including declining domestic production and rising global demand for LNG.

Bernstein notes that domestic gas production in Europe is falling, particularly in the UK, where North Sea gas output dropped by 12% in the first half of 2024. The Groningen gas field in Holland is completely shutting down, worsening regional supply constraints. With no new gas fields coming online, Europe’s reliance on imports will increase.

On the demand side, competition from Asia is mounting. China and India, both significant LNG consumers, have reported near double-digit growth in gas consumption this year. Brazil has also emerged as a major LNG importer due to a severe drought impacting hydroelectric power production. Similarly, Egypt, typically an exporter, has become a gas importer due to domestic shortages and decreasing output at the Zohr field.

Moreover, LNG export facility disruptions, such as those at Freeport in the US and Ichthys in Australia, have contributed to further market volatility.

The potential for a Trump 2.0 administration could introduce elevated tariffs, influencing gas prices in Europe and Asia through currency and trade ramifications.

Considering these interrelated factors, Bernstein anticipates a challenging winter for Europe, with sustained high prices expected in a tightening market.