TTF slips 1.3% to €44.73 as LNG recovery lags crude rebound

European natural-gas prices slipped Monday but remained elevated on the week as the reopening of the Strait of Hormuz boosted crude flows far faster than LNG shipping, leaving Gulf export capacity constrained well into the third quarter.

"The reopening of the Strait of Hormuz has reduced the risk of outright supply loss, but LNG shipping flows are recovering much more slowly than crude oil, leaving effective export capacity constrained well into 3Q," ANZ analysts said.

The benchmark Dutch TTF contract fell 1.3% to 44.73 euros a megawatt-hour in early trading Monday, paring a weekly gain that still exceeded 5%. The divergence between crude and gas markets is stark: Brent crude futures have erased all their wartime gains, tumbling 43% from a high in late April, while more than 60 million barrels of trapped Gulf oil have flooded back to market since the US-Iran memorandum of understanding in mid-June, according to data from Kpler and Energy Aspects.

"The collision of delayed LNG trade normalization and stronger Asian demand is likely to intensify competition, leaving Europe vulnerable to lower storage levels and keeping global gas markets structurally tight," the ANZ analysts said. European Union gas storage ended the last heating season at the lowest level in 15 years, the Financial Times reported, raising the risk of winter price spikes if LNG supply remains constrained.

LNG Recovery Lags as Asia Competition Intensifies

LNG shipping flows through the Strait of Hormuz are recovering at a fraction of the pace seen in crude markets. While Saudi Arabia and the United Arab Emirates have restored exports to near pre-war levels with the help of US military protection and pipeline bypass routes, LNG cargoes have been slower to resume. The bottleneck leaves effective export capacity from the Gulf constrained through the third quarter, according to ANZ.

At the same time, a strengthening El Niño is emerging as a major demand-side risk. Hotter weather across Asia is expected to lift electricity demand for cooling while weakening hydroelectric generation, forcing utilities to burn more gas. Asian LNG benchmark prices averaged $17.33 per million British thermal units in June, compared with Europe's TTF at $13.19, according to LSEG data cited by Reuters — a spread that has drawn the bulk of US LNG cargoes eastward.

Europe's Storage Squeeze Tests US Trade Commitment

The supply-demand imbalance comes as the European Union faces its lowest start-of-winter gas storage levels in 15 years. The bloc ended last heating season with inventories well below the five-year average after two consecutive mild winters gave way to normal seasonal demand.

The storage shortfall complicates the EU's commitment under the July 2025 trade deal framework to purchase $750 billion worth of American energy commodities over three years — a pledge that would require a dramatic ramp-up in US LNG imports. In June, European buyers took less than half of all US LNG exports, the first time in two years that the region's share fell below 50%, as Asian buyers outbid them on price.

"While the announced US-Iran deal has pushed down gas prices and raised hopes for a flood of Mideast Gulf supply returning to the market, the longer we see constrained LNG supply, the lower start-of-winter European gas stocks will be and the bigger the chance of winter price spikes," Argus Media analyst Natasha Fielding said.

The Institute for Energy Economics and Financial Analysis has warned that the EU could come to depend on the United States for as much as 80% of its LNG imports, up from 58% last year, as the bloc's ban on Russian LNG purchases takes effect in 2027. European buyers have been reluctant to sign long-term supply deals with US producers, fearing a replacement of one dependency with another, according to industry executives cited by Bloomberg.

This article is for informational purposes only and does not constitute investment advice.