European gas prices have steadied as milder weather has reduced withdrawals from storage, and low withdrawal rates are expected to continue in the coming weeks. ECMWF two-week forecasts show temperatures well above the 30-year average.
The main task now is refilling gas storage for next winter, with EU storage levels described as very low, including in Germany. Earlier cold conditions had driven much higher demand and faster withdrawals than seen recently.
Risk Of Hormuz Disruption
A further risk is disruption to LNG shipping if tensions rise between the US and Iran, as around one-fifth of global LNG supplies pass through the Strait of Hormuz. The EU imports limited LNG from Qatar, amounting to under 8% of total EU LNG imports last year and under 5% in January, based on Bruegel data.
If shipping through the strait were disrupted, global LNG supply could tighten and competition for cargoes could increase, pushing prices up. In such a scenario, the TTF natural gas price could rise sharply.
We are seeing European gas prices stabilize for now, thanks to warmer weather forecasts across the continent. This mild spell is slowing down how quickly we are drawing from our storage facilities. As of today, EU gas storage is approximately 62% full, which is a bit lower than the 65% level we saw at this time last year, highlighting an underlying tightness.
However, the current stability feels fragile and may be creating complacency regarding geopolitical risks simmering around the Strait of Hormuz. Any military escalation there would immediately tighten global LNG supply, even if our direct imports from the region are small. We only have to look back to the price shocks of 2022 to remember how quickly global competition for LNG can drive European prices into triple digits.
Trading Implications And Positioning
This suggests a clear opportunity for derivative traders in the coming weeks. With the market focused on mild near-term weather, implied volatility on TTF natural gas options has likely decreased, making upside protection relatively cheap. We should consider buying out-of-the-money call options for the second quarter to position for a sharp price spike at a limited cost.
Even if a conflict is avoided, the challenge of refilling our storage for next winter remains a significant hurdle. Recent data shows Asian LNG demand has been picking up, with January 2026 imports into the region rising 7% year-on-year, increasing competition for cargoes. This underlying bullish pressure provides a secondary thesis for holding long positions, as the injection season will likely begin with a tight market.
