European natural gas prices rise as Ukraine transit deal expires
Natural gas prices climb amid supply concerns
European natural gas prices climbed on Tuesday, driven by expectations of colder weather and the anticipated halt of Russian gas supplies via Ukraine starting January 1. The expiration of the five-year transit agreement between Ukraine and Russia has raised concerns over supply disruptions, impacting the Dutch TTF and British wholesale gas markets.
Meanwhile, U.S. natural gas prices declined, with Natural Gas (NG) trading at $3.70, down 2.33%. The pivot point at $3.80 remains a critical level, with immediate support at $3.53 and resistance at $4.20. Short-term technical indicators suggest consolidation, but a break above $4.20 could reignite bullish momentum.
Natural gas price dynamics (Nov 2024 - Dec 2024) Source: TradingView.
Market dynamics and supply concerns
The benchmark front-month Dutch TTF contract edged up by 0.38 euros to 48.23 euros per megawatt-hour (MWh), while the February contract rose to 48.55 euros/MWh. In Britain, the day-ahead contract increased by 2.95 pence to 120.45 pence per therm, marking its highest level since December 3.
Gazprom, Russia’s state-controlled gas company, reported reduced gas flows through Ukraine, with volumes expected to fall to zero starting January 1. On Tuesday, Gazprom delivered 37.2 million cubic meters (mcm), down from 42.4 mcm on Monday.
The colder weather forecast for northwest Europe later this week has added to the bullish sentiment, with increased demand for heating expected to drive prices higher.
Outlook for 2025
Analysts from MET Group highlighted potential volatility in the LNG market for 2025, citing delays in capacity additions and possible stronger-than-anticipated demand from Asia as key risk factors. These risks could offset forecasts of increased LNG supply from the U.S. and Qatar, potentially tightening the market.
European gas storage levels remain a critical buffer, but geopolitical disruptions could amplify market volatility. Industry experts caution that unexpected events may quickly alter supply-demand balances, keeping traders vigilant.
In our prior analysis, we discussed the decline of natural gas prices to $3.31, driven by bearish sentiment and technical barriers. These elements continue to shape the market’s outlook, reinforcing the importance of key support and resistance levels for traders.
