European gas prices have declined through most of the summer, with the downturn accelerating in August. Gas stocks are filling up and geopolitical turmoil has been pushed to the back burner, at least for the moment.
European gas prices have declined through most of the summer, with the downturn accelerating in August. Gas stocks are filling up and geopolitical turmoil has been pushed to the back burner, at least for the moment.
The European gas market has largely calmed over the summer. Back in early June, we reported new price increases, mainly triggered by the war between Israel and Iran. However, other reasons also prompted these increases, including low stock levels in Europe and fears of a hot summer with heat waves, nuclear power issues and consequent high gas consumption. Nevertheless, these concerns proved to be groundless and prices have been falling steadily over the summer instead. The drop reached its nadir in late August, when the day-ahead contract on the TTF gas exchange fell below 30 EUR/MWh, while futures for both next month and 2026 fell to 31 EUR/MWh. This marks a dramatic plummet over the summer months of over 20% compared to June levels when the Middle East war and uncertainty was at its peak.
This steep price plunge is the result of a summer that was bearish in virtually all relevant areas for the European gas market.
Firstly, the weather was favourable for gas consumers.
Although the Mediterranean has seen periodic heatwaves, Western and Central Europe, and particularly Germany and France, largely avoided the extreme heat that would have driven consumption sharply higher. Equally, unlike in many previous summers, French nuclear power production has faced no significant issues this year. Apart from a few isolated incidents, such as one plant shutting down because jellyfish were clogging its cooling system, France’s ageing nuclear plants have performed well over the summer. Their reliability has been crucial for Europe and has limited the need for additional gas use.
Secondly, the geopolitical situation is somewhat more subdued now than it was at the early summer.
While the war in Gaza continues apace, it is no longer having the same effect on global markets as before, and with Israel and Iran choosing to go their separate ways, markets are no longer as nervous as they were three months ago. Furthermore, Donald Trump has once again sought to pressure Ukraine, and especially Russia, to the negotiating table over a possible peace deal or ceasefire. While success still appears unlikely, the initiative itself has added to the downside in the market.
Finally, the supply situation in the market has been positive throughout the summer.
The summer months are always a time of production stoppages and lower flows from Norway, but this year schedules have largely been maintained, with no unwelcome surprises for the market LNG deliveries from other parts of the world have also been consistently high, and demand in Asia has been so low that it has not put significant pressure on Europe.
All these factors have meant that the EU has been able to stockpile plenty of gas over the summer. By late August, European gas storage facilities had reached 77% capacity, leaving markets abruptly more relaxed about Europe’s ability to get through the winter unscathed.
Unsurprisingly, the sharp fall in gas prices has spilled over into electricity markets, with prices declining across much of Europe where gas remains a key driver. In the Nordics, Denmark has been especially affected, with EPADs showing a marked decline.
The question now is whether further price drops are on the horizon, or whether we are bottoming out for now as we enter the so-called shoulder season. We mostly believe that prices will go back up from here. After all, plenty of uncertainties remain that could drive prices higher, and following the recent declines, the downside now appears more limited. If mild weather, stable supplies, and bearish geopolitical signals persist, we may still edge a little lower. But in the event of a cold start to autumn, unexpected supply issues, or renewed geopolitical tension, we believe the market is now better positioned for an upward adjustment. We therefore believe that prices will be higher in a month's time than they are currently.
