Back to “normal” levels?

European gas prices dropped significantly yesterday. There does not seem to be a single specific reason to explain this drop but a set of factors: more and more European countries asking for a temporary price cap, first signs of demand destruction (with Yara cutting ammonia and urea production at two European plants in response to soaring gas prices), the continuation of Russian gas flows (which averaged 270 mm cm/day yesterday, compared to 267 mm cm/day on Tuesday), profit taking…

At the close, NBP ICE April 2022 prices dropped by 137.860 p/th day-on-day (-26.96%), to 373.580 p/th. TTF ICE April 2022 prices were down by €58.67 (-27.35%), closing at €155.880/MWh. On the far curve, TTF ICE Cal 2023 prices were down by €6.91 (-8.39%), closing at €75.429/MWh. 

In Asia, JKM spot prices dropped by 27.93%, to €124.702/MWh; April 2022 prices dropped by 10.03%, to €120.049/MWh.

TTF ICE April 2022 prices fell yesterday more than we expected, breaking the support of the 5-day Low target. The movement seems excessive, but it is backed by the fundamentals stated above. And technically, we must remember that the “normal” trajectory for prices is to trade inside the 5-day range, itself contained in the 20-day range, itself contained in the 1-year range. If no major fundamentals disrupt this return to “normal”, prices could trade today in a zone between the 20-day High (€137.47/MWh) and the 5-day Low (€165.75/MWh).