European natural gas prices experienced a "tale of two extremes" in February: hitting a two-year high and then plummeting continuously.

The likelihood of a peace agreement between Russia and Ukraine has greatly increased, and the continued strong push for LNG transportation from North America is set to end the February trading session in the European natural gas market with the largest monthly drop and record market trading volume to date, following a turbulent February in trading prices, European natural gas futures traders are recalibrating their future trading expectations. Overall, the drastic fluctuations in European natural gas prices stem from dual shocks: the efforts of the Trump administration to push for a ceasefire agreement between Russia and Ukraine, as well as intense discussions within the EU regarding supplementing natural gas storage facilities across Europe - the current inventory of natural gas in Europe has dropped to its lowest level since 2022, which is also the core logic behind the record high natural gas prices in European futures in February. The European benchmark price for natural gas - TTF Dutch natural gas futures prices skyrocketed to their highest point in two years at the beginning of the month, but the price has been steadily declining for most of the month, with a cumulative drop of 13% as of Friday. ICE Intercontinental Exchange data shows that as of February 27, trading volume for TTF futures and options contracts reached 11.45 million lots, setting a historical new high for the month. According to ICE statistics, the total open interest also reached a record high at the beginning of February. On the last trading day of the month, the European benchmark Dutch natural gas futures prices rose by over 2%, continuing to rebound from the lowest point reached earlier in the week. Commodity traders in Europe continue to monitor the progress of the Russia-Ukraine ceasefire, betting on whether Russian pipeline gas can return to Europe after the ceasefire. Trump announced that Ukrainian President Zelensky will visit the U.S. on Friday to sign a draft agreement on natural resources, which may accelerate broader Russia-Ukraine ceasefire negotiations. More information on European gas storage policy trends may be revealed next week: the European Commission plans to extend gas storage targets to 2027, with member states planning to use this to request more flexible natural gas policies this year. Leading energy consultancy Energy Aspects Ltd. warned of significant upside risks to European gas prices, particularly if gas storage progress falls below historical levels and global LNG projects are further delayed, in addition to uncertainty around the timeline for the resumption of Russian pipeline gas transport. "Even if a peace agreement is reached between Russia and Ukraine this year, the possibility of Russian pipeline gas resuming transport remains very low," analysts including James Waddell noted in a report. "However, completely ruling out the return of this type of gas supply is still not realistic." As of 8:39 AM in Amsterdam, the European benchmark Dutch TTF April delivery natural gas futures prices rose by 2.8% to 46.41 euros per megawatt-hour, significantly lower than the 2-year high of 60 euros per megawatt-hour set in February.