European Gas Prices Surge Amid Lower Inventories and U.S. LNG Exports Ban Lift

European gas prices have risen sharply in recent weeks, driven by lower inventories and the anticipated lifting of the U.S. LNG exports ban. As temperatures are expected to remain mild, gas storage levels have been slow to rise, leading to concerns about supply security during the winter months. Meanwhile, the U.S. is set to become a major player in the global LNG market, which could have significant implications for European gas prices and market dynamics.



European gas inventories have been slow to rise this year, with an unusually small increase in late-summer and early-winter storage. As of October 1, 2024, combined EU and UK stocks were at the second-highest level on record for the time of year, but storage sites were only 94% full. This slow inventory accumulation could have easily turned into an early start to depletion, but benchmark Dutch TTF front-month futures have climbed to an average of €40 per megawatt-hour so far in October to extend the stock build and avert premature draws.

The region will have to rely on imports of liquefied natural gas (LNG) to meet 30% or more of its consumption, according to modelling by the European Network of Transmission System Operators for Gas (ENTSOG). This increased reliance on LNG imports has put pressure on global LNG markets, leading to higher prices and increased competition for available cargoes. The ongoing geopolitical instability and uncertainty around remaining Russian gas transits via Ukraine have also contributed to the lower levels of gas inventories observed in recent months.



The lifting of the U.S. LNG exports ban is expected to have a significant impact on global gas prices, particularly in Europe, due to increased competition and supply. The U.S. is expected to become a major player in the global LNG market, which could put downward pressure on global gas prices and reduce European reliance on Russian gas. This increased competition is likely to put downward pressure on global gas prices, while also helping Europe replenish its gas storage levels more quickly, ensuring a comfortable supply during the winter season and reducing the risk of price spikes.

In the long term, the lifting of the U.S. LNG exports ban is expected to enhance European energy security by providing a more diverse range of gas supply sources. However, it may also increase global gas market volatility, as the U.S. becomes a major player in the global LNG market. Additionally, the increased availability of LNG from the U.S. may lead to a reduction in conventional gas demand in Europe, supporting the EU's decarbonization goals.

In conclusion, European gas prices have risen sharply in recent weeks due to lower inventories and the anticipated lifting of the U.S. LNG exports ban. While the short-term impact of the lifting of the ban is expected to be limited, it could have significant implications for European gas prices and market dynamics in the long term. As the U.S. becomes a major player in the global LNG market, European gas prices will be more exposed to global competition and may experience increased volatility. However, the increased availability of LNG from the U.S. may also support the EU's decarbonization goals by reducing conventional gas demand.