European gas prices have dropped due to predictions of milder weather and strong deliveries of liquefied natural gas (LNG). The TTF index fell by over 5.5% in just one day. While Europe recently faced colder temperatures, upcoming forecasts suggest a warm-up later in the month. High LNG shipments will help ease supply concerns in the short term. Despite these price drops, gas storage levels are now below 60%. This is significantly lower than the five-year average of 73%. The reduced storage levels may prevent gas prices from falling further soon. The article also highlights insights from FXStreet analysts about market trends, including currency changes and economic forecasts. Readers are cautioned to understand the risks of engaging in open market activities and to do thorough research before making financial choices. European natural gas prices continue to decline, with the front-month TTF contract falling below €30 per megawatt-hour this morning, the lowest since last November. This negative trend is fueled by predictions of milder weather in Northwest Europe during the latter part of January and strong LNG deliveries. Data from ports indicate that LNG import terminals are running at over 90% capacity, reducing immediate supply concerns. However, we need to be cautious about potential risks, as the price floor appears to be stabilizing. Data from Gas Infrastructure Europe (GIE) shows that total EU storage levels have dropped to 59.5%, well below the five-year average of 73% for this time. Such low storage will limit how much prices can decrease further since any unexpected cold spell could tighten the market quickly. This situation reminds us of the supply worries we faced in 2025, where low storage led to significant price swings. The current lack of buffer makes the market very sensitive to any supply disruptions, whether from pipeline problems or LNG delivery delays. As a result, implied volatility on natural gas options has increased, indicating that the market is preparing for possible price changes. In the coming weeks, it may be wise to sell short-dated futures to take advantage of the current price drop while also buying call options for February or March. This strategy allows traders to benefit from short-term weaknesses while staying ready for a price spike if weather conditions change or storage withdrawal rates increase. Additionally, trading calendar spreads that bet on higher prices for late winter delivery compared to the current contract is becoming an appealing strategy.

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