Gas prices are rising sharply because a cold spell in Europe is increasing consumption and storage levels are far below the seasonal average. The Dutch Title Transfer Facility (TTF), considered the most important reference market for natural gas in Europe, is a key factor in price formation, consolidating supply and demand expectations. Traders are securing volumes more quickly, resulting in a significant price increase within just a few days. The weekly price increase is around 20 percent. (handelsblatt: 16.01.26)
Gas Prices in Focus: TTF as Leading Market Reaches Highest Level Since August
The market is focusing on the TTF (Total Time Fund) because this benchmark price often dictates procurement in Europe. The futures contract for delivery in one month was trading at €34.30 per megawatt-hour on the Amsterdam exchange. This marks the highest level for the reference price since last August. The price jump is also considered the strongest weekly increase since October 2023.
This is relevant for Germany because suppliers and industry often base their calculations and new contracts on the gas index. If this benchmark rises, the costs for future delivery periods also increase, even though existing contracts sometimes react with a delay. At the same time, the cold weather increases consumption, thus increasing the pressure on short-term availability.
Gas storage in focus: Low storage levels drive up risk premiums
Many market participants attribute the price increase to the state of gas storage facilities, as reserves determine the available capacity during the winter. Europe’s gas storage facilities are currently at around 52 percent. The seasonal average is about 67 percent. This deviation is significant and leads to a higher risk premium because the market is more sensitive to additional demand.
Icy temperatures are expected again at the end of the month, which could prolong the period of intensive withdrawals. The risk increases that the winter will end with comparatively low storage levels. Refilling in the spring will then be more difficult and expensive because larger quantities will need to be procured, while traders are already pricing in the next winter. Gas prices often react quickly to such expectations because hedging transactions drive prices up.
Natural Gas and Geopolitics: Iran Risk Spreads Through Turkey to Europe
Besides weather and storage levels, the situation in the Middle East is also impacting price formation. Iran is an important gas supplier for Turkey, but concerns about potential disruptions are growing in the market. Additional uncertainty is coming from Washington, as the US government has threatened new 25 percent tariffs on Iranian trading partners to exert pressure on Tehran.
Should deliveries from Iran be disrupted, Turkey would have to procure more natural gas on the global market, thus competing with European buyers. This would put further pressure on prices because available quantities would then be tied up more quickly. For buyers, it’s not just the physical situation that matters, but also the expectation of increased competition for natural gas. In such phases, gas prices often rise even when no immediate shortage is demonstrable.
LNG and China: Liquefied Natural Gas Intensifies Competition for Spot Quantities
Another driver is the demand for LNG, or liquefied natural gas, which is transported by ship. China is considered the world’s largest consumer of LNG, and increased demand there could significantly intensify global competition. Europe relies on these flexible supplies during periods of tight supply because LNG can supplement existing supplies at short notice when other sources are insufficient.
If Asian buyers accept higher prices, shipments are diverted, driving up prices in Europe. This mechanism also affects Germany because international spot prices impact procurement. At the same time, storage capacity remains crucial, as low gas storage levels limit the buffer against further cold spells. This can make LNG a price driver because every additional import is valued more highly. Thus, gas prices remain volatile as long as weather, reserves, and the global market simultaneously create tension.