Prices rose to record highs before falling

Torn between opposing fundamentals, European gas prices reached new historical highs yesterday before closing lower. As proof that gas supply is becoming a problem in the country, Ukraine’s energy ministry has banned the export of gas held in Ukraine, including gas into storages (usually held by Western Europe operators that can move it back to their markets). The ban does not apply to the Russian gas in transit to Europe which continues to flow, at stable levels yesterday, although total Russian supply was down (to 260 mm cm/day, compared to 267 mm cm/day on Wednesday). But the replacement of the now unavailable Ukrainian gas may lead to upward pressure on Western Europe markets.

However, a bearish sentiment came from Germany’s economy minister who said he would oppose a ban on Russian energy imports, saying it could endanger social cohesion in the country.

At the close, NBP ICE April 2022 prices dropped by 10.000 p/th day-on-day (-2.54%), to 384.050 p/th. TTF ICE April 2022 prices were down by €4.72 (-2.85%), closing at €160.823/MWh. On the far curve, TTF ICE Cal 2023 prices were down by €1.66 (-2.07%), closing at €78.321/MWh.

In Asia, JKM spot prices increased by 23.73%, to €184.084/MWh; April 2022 prices increased by 13.82%, to €134.463/MWh.

TTF ICE April 2022 prices rose yesterday to a new record of €199.99/MWh before falling and closing lower. The continuation of Russian supply creates a disincentive to overbid, as well as the first signs of demand destruction (due to higher prices but also to the disruption of supply chains caused by the war). However, with higher Asia JKM spot prices suggesting stronger competition for flexible LNG cargoes, the downside potential seems limited. Without major fundamental element, the most likely scenario is for prices to return back to their “normal” trading range, i.e. below the 5-day High, today or on Monday.