Europe’s gas market shifts from stress to relief - but the real test still lies ahead

Key points:

• March withdrawals fell to a six-year low, driven by mild windy weather and delayed supply disruption.
• Dutch TTF benchmark gas has retreated from EUR 75/MWh to ~EUR 50/MWh as demand eased and LNG resales increased.
• Europe is still receiving pre-closure Qatari cargoes, with the final arrivals due next week.
• Low storage levels leave the market exposed ahead of refill season once new LNG flows tighten

Europe’s gas market has entered a period of temporary calm, but elevated prices highlighting that underlying risks remain firmly in place. March withdrawals from EU storage dropped to just 28.3 TWh, the lowest level for the month since 2019 and nearly half the 53 TWh average seen over the past three years. At first glance, this sharp decline may suggest an easing of supply concerns. In reality, it mostly reflects a combination of softer demand due mild and windy weather.

The primary driver behind the reduced withdrawals has been unseasonably mild and windy weather, with strong renewable power generation further suppressing gas demand. This has curtailed late-season heating needs across much of the region and allowed storage levels to stabilise at a time when the market would normally be drawing more aggressively. At the same time, elevated prices during March - when the Dutch TTF benchmark surged from around EUR 30/MWh to a peak near EUR 75/MWh - have triggered some demand destruction, particularly among industrial users sensitive to short-term price spikes.

However, the supply side has also played a crucial role in masking the emerging tightness. Europe continues to receive LNG cargoes from Qatar that were loaded before the effective closure of the Strait of Hormuz, providing a temporary buffer between rising geopolitical risk and the physical impact on flows. The final of these pre-closure cargoes are expected to arrive next week after an approximately 35-day voyage. Only then is the full extent of the disruption likely to materialise, potentially keeping prices elevated through the refill season as Europe competes with Asian buyers - the normal destination for the bulk of Qatari production. 

Additional relief has come from Asia, where China last month shifted from being the world’s top LNG importer to a key regional reseller, offloading a record 8–10 cargoes. This arbitrage reflects a mix of high global prices and a domestic surplus, partly due to softer-than-expected industrial activity. China is also better insulated from Middle East disruption than its neighbours, supported by steady pipeline inflows from Russia via Power of Siberia, rising domestic output and storage estimated at around 51% by end-March. The resale of these cargoes has loosened prompt supply conditions, contributing to the pullback in TTF from recent highs to around EUR 50/MWh currently.

Looking ahead, however, the outlook remains far from comfortable. Iran has not allowed a single LNG cargo to transit the Strait of Hormuz since the conflict began more than a month ago, underlining the severity of the disruption. More recently, reports of Qatari shipments being denied passage and forced to turn back highlight the growing risk that new supply flows may be curtailed for an extended period. Once the backlog of pre-closure cargoes has cleared, Europe will become increasingly reliant on alternative LNG sources in an already tightening global market.

This challenge is compounded by the current state of European storage. Sites are just 28.4% full, well below the 34.8% level seen at the same time last year and well under the five-year average of 41.6%. While lower withdrawals in March have helped preserve some inventory, the region now enters the refill season from a weaker starting point. This shifts the focus from winter demand to summer procurement, where competition with Asia for LNG cargoes is likely to intensify - especially if Chinese demand recovers and resales decline.

In this context, the recent easing in prices should be viewed with caution. The market has not resolved its supply challenges; it has merely postponed them. The combination of delayed disruption, opportunistic LNG resales and favourable weather conditions has bought Europe time - but not security.

As the calendar moves deeper into spring, the key inflection point will be whether LNG flows from Qatar and the wider Gulf region can resume normal transit. If not, the current balance risks tightening rapidly, with storage refill targets becoming increasingly difficult and potentially more costly to achieve. In short, Europe’s gas market has transitioned from acute stress to temporary relief. But with inventories low and supply risks unresolved, the real test is likely still ahead.