Welcome To Europe's Natural Gas Car Crash
European natural gas prices are back at their highest since 2022, firmly in energy-crisis territory. At around €97/MWh, TTF now trades at 10x the US gas price and is up 2.5x from its April lows. We have been long TTF since the Iran crisis began. It has been our highest-conviction call of the year, made when it was far from the consensus view, and it is playing out.
TTF price (€/MWh)
Source: Barchart (month ahead)
We have held this view since April
What is noteworthy is how little our year-end storage forecast has shifted since we turned bullish at the start of the Iran conflict. Injections ran ahead of what we had assumed through the summer, but we have since lowered our demand projections on a now-milder base case, and the two broadly offset. The chart below shows our forecast today against where it stood back in April.
Our EU gas storage forecast, today versus April (% full)
Source: Asymmetric Research. * Our current forecasts shown here assume no cold spells later this year
The cushion that saved Europe last time is thinner
With the injection season effectively over, attention turns to heating demand, and the key point is that demand destruction is likely to be limited this time. European gas consumption has already reset at structurally lower levels since 2022, down around 60 bcm, or 16%, versus 2021. Having already cut the easy demand, any price spike from here bites less on consumption and more on the economy, and prices can stay elevated for longer. The demand-destruction buffer that cushioned Europe in the last crisis is smaller now.
Qatar again extended its force majeure
This week QatarEnergy again extended its LNG force majeure to Italy’s Edison, now to end-December, the fifth extension this year. The same is true for Pakistan. Worth noting that only a few weeks back the market was getting excited about a minor resumption of LNG tanker flows out of Qatar, though still running at around a third of pre-war levels. This extension should dampen that excitement.
And the warm-winter bet is starting to wobble
Until recently a mild winter was treated as a given, by the market and by the politicians relying on it. In the past few days, the odds of a consistently warm winter have turned, and some models now point to potentially much colder spells late in November and into early December. Our base case still leans on mild overall, but the easy comfort of a guaranteed warm winter is gone, and that is the assumption a lot of the current calm rests on.
Brussels is reading the data selectively
European politicians and some academics keep reminding the market that storage should be read in the context of lower demand since 2022. But they do not, at the same time, adjust for the loss of Russian gas flows planned for next year, which makes the conclusion misleading. Pipeline gas long-term contracts are due to be phased out by September to November 2027, and the legislative window to alter any of this has, to our mind, now closed for this year. The official message remains that all is well. The data say otherwise. In short, the crisis is here, and policymakers have been asleep at the wheel, if not actively driving towards the cliff.
And a Russian return is not coming to the rescue
The US has reportedly floated the idea of Europe buying more Russian gas as part of a potential Ukraine peace deal. Commission President von der Leyen rejected it clearly. President Putin, for his part, floated restoring flows through the undamaged Nord Stream line, while noting it remains under sanction and that Germany, whose coalition is firmly against, would need to agree. Our view has long been that Europe will eventually have to reconsider Russian gas, but we expected the pain to come first. The political conditions for a reversal are not yet in place, and the legal and geopolitical obstacles remain substantial. We see no meaningful return of Russian volumes before late 2027 at the earliest. Until then, Russia holds real leverage over Europe at its most vulnerable point.
The official response is incremental
Some policymakers are beginning to take supply security more seriously, but the steps are small. Germany has mandated filling storage by an additional 8 TWh by December, which does little to change the broader picture. The UK has given the green light to the Jackdaw gas project, but we expect only minimal volumes next year, ramping towards around 2.5 bcm of capacity in 2028. Neither materially alters European dynamics. The next few months force the issue: the injection season is over, storage is drawing down, and there is no quick supply fix on the table.
Bottom line
The Qatari force majeure, the thinner demand cushion, the weather models turning, the looming Russian phase-out and an incremental official response all point the same way. Where storage ends after winter, where that leaves TTF, where the asymmetry is and how we are positioned: read our full report.
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Our full storage scenarios into the end of winter, where we see TTF going from here, and exactly how we are positioned, are in our latest report on Asymmetric Research: asymmetricresearch.substack.com
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Disclaimer: This article is for informational purposes only and does not constitute investment advice or a personal recommendation. Past performance is not indicative of future results. The value of investments can go down as well as up. Natural gas and related instruments are highly volatile. Readers should seek independent professional financial advice before making any investment decision. We are long TTF futures.