European gas prices have decreased, influenced by forecasts of milder weather and strong liquefied natural gas (LNG) deliveries. The TTF index saw a decrease of over 5.5% in a single day. Though Europe recently experienced colder-than-average temperatures, forecasts predict milder conditions later in the month. Strong LNG send-outs will help ease short-term supply concerns in the market.
Despite falling prices, gas storage levels have now dipped below 60%. This is considerably below the five-year average of 73% full. The decrease in storage is expected to prevent further declines in gas prices in the near future.
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We are seeing European natural gas prices continue to fall, with the front-month TTF contract dipping below €30 per megawatt-hour this morning for the first time since last November. This bearish sentiment is being driven by forecasts for milder weather across Northwest Europe in the second half of January and very strong liquefied natural gas deliveries. Data from port authorities shows LNG import terminals are currently operating at over 90% capacity, easing any immediate supply fears.
However, we must watch the downside risk carefully, as the price floor seems to be firming up. Gas Infrastructure Europe (GIE) data released today confirms that aggregate EU storage levels have just dropped to 59.5%, which is well below the five-year average of 73% for this time of year. This low inventory level will limit how much further prices can fall, as any unexpected cold snap would rapidly tighten the market.
This situation brings back memories of the supply anxieties we navigated through 2025, where low storage created significant price volatility. The current low buffer means the market remains extremely sensitive to any supply disruption news, whether from pipeline issues or LNG cargo delays. Consequently, implied volatility on natural gas options has ticked up, suggesting the market is bracing for a potential price swing.
For the coming weeks, this environment suggests that selling short-dated futures to ride the current downward trend, while simultaneously buying call options for February or March, could be a prudent strategy. This allows for capturing short-term weakness while maintaining exposure to a potential price spike if the weather turns or storage withdrawal rates accelerate. Trading calendar spreads that bet on a steeper price for late winter delivery compared to the current front-month contract is also becoming an attractive play.
