European prices rose to record levels. Irrational?

European gas prices increased strongly yesterday, supported by the additional drop in Russian flows, down to 252 mm cm/day on average, compared to 258 mm cm/day on Monday, as Mallnow flows fell to 0 before switching to reverse mode. Norwegian flows were up, averaging 350 mm cm/day, compared to 342 mm cm/day on Monday. Note that Asia JKM prices were moderately up (+6.26% on the spot, to €135.714/MWh, +9.52% for the February 2022 contract, to €149.227/MWh), remaining well below European prices.

At the close, NBP ICE January 2022 prices increased by 79.890 p/th day-on-day (+21.49%), to 451.720 p/th. TTF ICE January 2022 prices were up by €33.34 (+22.69%) at the close, to €180.267/MWh. On the far curve, TTF Cal 2022 prices were up by €33.69 (+32.40%), closing at €137.675/MWh.

The lower liquidity amplified the movements in TTF ICE January 2022 prices yesterday. But if the magnitude of the increase may seem irrational, the €180.267/MWh Close level and even more the €187.785/MWh High level are the max levels that could be achieved without the market reaching our ultimate indicator of technical overbuying (ie the 5-day average above the 5-day High). With now almost all the financial participants bears pushed to stop loss and the bulls taking their profits, prices are correcting downward this morning. However, last minute buying by physical participants ahead of the contract expiry on 30 December can still lend support. Fundamentally, there is now evidence of LNG ships destined for Asia changing tack mid-voyage to supply Europe. For once, it would be irrational if this does not (finally) produce effects.