Recent data shows that cheaper European gas prices have led to Qatari LNG shipments being redirected from Europe to India. Between 1st and 9th December, LNG imports to Europe decreased compared to November, aided by mild temperatures that kept gas storage levels from falling too quickly.
There are emerging concerns about the reliability of US supply due to uncertain winter gas demand. If domestic US demand is higher than anticipated, this could reduce the volume available for export, potentially causing US gas prices to rise during cold spells.
Fall in Gas Prices
Mid-December saw a fall in gas prices thanks to milder weather. However, in the medium term, the demand for gas is expected to increase due to higher electricity consumption by data centres. The International Energy Agency noted this as a reason for raising forecasts for US electricity consumption earlier this year.
The current low European gas prices are pushing Qatari LNG cargoes toward more profitable markets like India. We see that gas storage in the EU is still quite high for this time of year, reported at 92% full this week by Gas Infrastructure Europe, which is comfortably above the five-year average. This has kept the market relatively calm heading into the holiday period.
This calmness presents a potential opportunity, as the market seems to be underpricing the risk of a sudden cold snap. Major meteorological models are now forecasting a significant drop in temperatures across Northwest Europe for the last week of December. Buying out-of-the-money call options on January or February 2026 TTF futures could be a low-cost way to position for a sharp price rebound if heating demand surges.
Risks to US Supply
We must also consider the risks to supply from the United States, which could become less reliable than the market expects. Recent EIA data shows a 5% dip in weekly LNG export volumes from key Gulf Coast terminals compared to the November average. This suggests that any increase in U.S. domestic demand could quickly reduce the amount of gas available for Europe.
This concern is tied to the long-term trend of rising U.S. electricity consumption, a pattern we saw building when utilities revised demand forecasts upward back in 2023 due to data center growth. Given the recent dip in U.S. gas prices from mild weather, we could see this as a chance to enter long positions on Henry Hub futures. This would be a bet that domestic heating and power generation demand will tighten the market as winter progresses.
