Anticipating evolving dynamics in the European natural gas market requires an understanding of a complex range of factors. As global gas markets become more interlinked and geopolitics interfere with supply and demand, that task is only becoming more difficult for traders.
In a recent webinar we drew on data from our new proprietary European Supply & Demand explore the fundamentals and risks likely to affect demand, supply, storage and pricing over the next 18 months. Fill out the form at the top of the page to access the webinar presentation – or read on for a quick overview.
Current state of the market
Weather patterns and geopolitical risks have been the key drivers of European gas prices in recent months. A cold winter pushed prices close to US$17/mmbtu in January, but they quickly fell amid renewed peace talks between Russia and Ukraine and the announcement of sweeping U.S. tariffs. Prices then fluctuated sharply following the outbreak of conflict between Israel and Iran. With some of these risks now easing, traders are shifting their focus back to market fundamentals, with storage levels remaining well below the seasonal average as summer begins.
Structural decline in demand
Even once climate factors have been accounted for, our modelling shows a structural decline in both residential & commercial and industrial gas demand in Europe. In residential & commercial this is mainly due to efficiency improvements through the increased use of heat pumps, reducing gas demand for heating.
In industry, we expect demand this year to be as much as 20% lower than before the Ukraine-Russia conflict. However, up to 10% of industrial demand could return in the short term, depending on fuel switching in the refining sector or increased ammonia production, which are the two main drivers of industrial gas demand in Europe.
Changes in the power market
Aside from the impact of tariffs, structural changes are driving dynamics for gas use in European power generation. With the growth in solar expected to outpace coal retirements by 2027 (see charts below), renewables penetration is reducing overall thermal generation, which made up just 20% of the power mix in May 2025.