Natural gas prices decline as milder weather and EU storage concerns weigh on market
European gas prices slide as mild weather lowers demand
European natural gas futures dropped over 4% to €49 per megawatt-hour on Friday, marking a two-week low, as warmer weather forecasts and increased wind generation softened heating demand. The decline follows growing EU discussions on storage targets, with Germany pushing for more flexibility due to rising replenishment costs.
The market also reacted to U.S.-led diplomatic efforts to resolve the Russia-Ukraine war, which could ease supply risks.
Natural gas price dynamics (Aug 2024 - Feb 2025) Source: TradingView.
Warmer weather and EU storage discussions pressure gas prices
A shift toward milder temperatures and higher wind speeds is expected to lower natural gas consumption across Europe, easing short-term supply pressures. However, EU storage sites have depleted faster than anticipated this winter, leaving inventories around 47% full—complicating the EU’s 90% storage mandate by November 1. Germany is now advocating for less rigid storage requirements, citing the financial burden of refilling reserves at elevated prices.
Additionally, U.S. peace negotiations regarding the Russia-Ukraine war have provided market optimism, as any progress toward a resolution may reduce geopolitical supply concerns. Despite this, natural gas remains volatile, with traders closely watching demand fluctuations and possible policy adjustments.
Technical analysis: Key price levels to watch
Natural gas (NG) is trading at $3.687, up 0.14%, signaling cautious optimism. The 50-day EMA at $3.555 suggests buying interest remains intact, while the pivot point at $3.720 will be key in determining near-term price action. If NG holds above $3.720, an advance toward $3.790 is likely, with a potential breakout aiming for $3.901.
However, failure to sustain above this level may trigger selling pressure, leading to a decline toward $3.539, with additional downside at $3.429. A bullish engulfing candle pattern has emerged, indicating fresh buying activity, while an ascending trendline continues to support upside movement.
Market outlook: Balancing supply risks and demand expectations
Although milder weather and EU storage concerns are weighing on prices, potential demand increases from colder regions could provide support. Additionally, geopolitical shifts and policy developments will remain major factors influencing price action. Traders should monitor the $3.720 pivot level, as holding above it may sustain bullish sentiment, whereas a drop below could trigger further downside momentum.
In our previous analysis, we highlighted how cold weather and storage depletion drove gas prices higher. Now, with EU policy shifts and demand concerns, traders are closely monitoring upcoming price action for potential volatility.
