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European natural gas prices trade near €32.7 per megawatt-hour as of writing, down more than 8% on the day and marking a clear slide since January 23. The Dutch TTF benchmark has retreated from January highs near €40/MWh, even after brief rebounds driven by cold-weather forecasts.
Source: Trading Economics
The price action highlights a market that continues to sell rallies. Why does gas keep falling while inventories shrink?
Short-Term Weather Lifts Fail to Hold
Earlier this month, European gas futures rebounded above €35/MWh after forecasts pointed to a fresh cold front across northern and eastern Europe. Colder temperatures raised expectations for higher heating demand, while weak wind output across northwest Europe increased reliance on gas-fired power generation.
Traders responded by lifting shipments of North American LNG. However, the rebound faded quickly as weather risks failed to outweigh broader supply dynamics.
Storage Levels Sink Below Last Year
EU gas storage levels remain well below last year’s range for the same period. Inventories stood roughly between 37% and 41% full in early February, compared with about 52% a year earlier.
Germany reported storage near 30.2%, France around 29%, and the Netherlands close to 23.5%. Projections point to EU stocks falling toward 26% by the end of March. Under normal conditions, such levels would support prices. This time, the market looks past them.
LNG Supply Dominates Market Thinking
Strong LNG inflows continue to reshape Europe’s gas balance. The United States has emerged as the dominant supplier, accounting for more than half of Europe’s LNG imports by late 2025. Cargo arrivals remained heavy into early 2026, creating confidence around supply availability.
Traders now view LNG as a flexible buffer that offsets low storage. As a result, storage risks no longer command the same premium they once did.
Demand Stays Structurally Lower
European gas demand has settled at a lower level than historical norms. Industrial consumption remains subdued, reflecting weaker manufacturing activity and long-term efficiency gains. Renewable energy expansion has also reduced gas use in power generation, especially during periods of strong wind and solar output.
Even during cold spells, demand spikes have proven short-lived. This structural shift continues to cap upside in gas prices.
Geopolitical concerns also no longer drive prices as they did in prior years. Hopes for progress in Ukraine peace discussions and calmer conditions around key shipping routes have reduced risk premiums. Traders no longer price in severe supply disruptions as a base case.
This shift has pulled futures lower from January peaks and encouraged more aggressive selling during rallies.
Financial Positioning Reinforces the Downtrend
Financial market positioning has also weighed on prices. Data shows a rise in short positions as traders bet on further declines. These positions amplify downward moves when prices weaken and limit recoveries during temporary rebounds. As bearish sentiment builds, momentum-driven trading keeps pressure on the front-month contracts.
What’s the Outlook?
Looking ahead, analysts expect global LNG supply to grow by about 9% in 2026. Major projects in the United States, including Golden Pass, and expansions in Qatar add to expected output.
This growth supports expectations of structural oversupply. Forecasts from banks and commodity analysts point to prices drifting toward €26–€30/MWh by summer, assuming no prolonged cold shock.
A Market Focused on What Comes Next
Despite historically low storage levels for February, traders focus on forward supply rather than backward-looking metrics. Strong LNG inflows and mild weather forecasts continue to dominate pricing models.
The result is a market that shrugs off low inventories and trades on abundance. For now, European gas prices tell a clear story. Supply confidence rules the tape, and storage risks wait in the wings.
