My name is Daniela Corsini, Senior Economist Intesa Sanpaolo. In this episode I will discuss about energy markets, with a special focus on European natural gas.
In 2025, flows through the Strait of Hormuz accounted for around 14 per cent of global crude oil consumption, compared with just 5 per cent for gas. Therefore, when war broke out in Iran in February 2026, it would have been reasonable to expect Brent prices – the main crude oil benchmark – to rise more than TTF prices, where TTF is the European natural gas benchmark.
However, the opposite happened. From February 27th to October 26th, Brent rose by 60 per cent, while TTF surged by as much as 203 per cent. Until June, the performance of the two benchmarks was broadly in line, but then TTF rose much more rapidly during periods of escalation while falling less sharply than Brent when geopolitical tensions eased.
Why this difference, and why from June onwards?
Firstly, this summer, exceptional temperature anomalies and problems with power generation from nuclear, renewable and coal sources increased demand for gas and slowed down the restocking process.
In fact, as at October 25th, gas storage facilities across Europe were 75 per cent full – the lowest level for this time of year: 2 points below the previous record low set in 2021, and a full 15 points below the five-year average.
In addition, there was significant variation between countries. In Italy, storage facilities were 91 per cent full, around 16 points above this year’s average and 1 point above the historical continental average. In France, despite several issues reported at some nuclear reactors, deposits were 87 per cent full. By contrast, storage levels stood at just 62 per cent in Germany and 65 per cent in the Netherlands, as operators in both countries had not invested in the restocking process.
It's important to remember that gas inventories are used to cope with seasonal peaks in demand linked to winter heating consumption, whilst gas shipments remain relatively stable throughout the year. Starting the winter with low stock levels means that, during the colder months, greater flexibility in imports will be required to meet any fluctuations in demand. Unfortunately, greater dependence on foreign supplies poses a risk to energy security in a context where supply flows are constrained by geopolitical factors.
Indeed, global supply of liquefied natural gas, or LNG, has declined significantly due to tensions in the Strait of Hormuz and the fallout from the war in the Middle East. Furthermore, for Europe, the range of potential importers will be further reduced in 2027, when purchases of Russian LNG will be completely banned.
The LNG availability issue adds to the price issue. Indeed, spot cargoes offer advantages, such as greater flexibility in terms of volumes and delivery times, but they normally cost more than pipeline flows due to higher production and transport costs. Compared with long-term contracts, spot cargoes are more subject to competition from Asia and more vulnerable to global market tensions caused by technical, logistical or geopolitical issues.
Given these challenges, we expect TTF prices to remain high. We estimate an average of around 75 euros per MWh in the fourth quarter 2026 and 63 euros in the first quarter of 2027. Then, hopefully a possible easing of tensions in the Middle East and the expected improvement in global supply due to previous investments in liquefaction capacity may push prices down from around 56 euros in 2026 to an average of 47 euros in 2027. Prices, however, should remain high even in the long term: for 2030, we estimate an average price of around 30 euros, compared with a pre-crisis average of around 18 euros.
It is, however, possible that these upward pressures on gas prices will not be fully passed on to the electricity cost. In fact, European gas consumption is in structural (albeit slight) decline, partly due to energy efficiency measures and diversification of power generation towards renewable sources, at the expenses of fossil fuels. Generally speaking, self-generation reduces dependence on foreign supplies and helps to lower costs for households and companies. However, we warn that to improve diversification and resilience of the energy sector, as well as to achieve decarbonisation, significant investment in infrastructure is still required, and greater cooperation between EU Member States remain essential.
