Prices rose to all-time highs

European gas prices rose to new all-time highs on Friday. Although Russian supply continues to flow (even increasing to 267 mm cm/day on average on Friday, compared to 260 mm cm/day on Thursday), market participants continued to fear disruptions in the near future. Moreover, the announcement that the European Commission will propose this week gas storage measures (probably to build up gas storage levels to close to 90% full by October) to help mitigate the impact of any Russian gas supply disruptions had a major impact: it pushed Summer 2022 prices significantly up and Winter 2022 prices down. In fact, the former were already trading above the latter, a disincentive to buy and put gas into storages. By imposing a storage obligation, the EC tries to overcomes this difficulty, but at the cost of a strong deformation of the curve.

At the close, NBP ICE April 2022 prices increased by 76.220 p/th day-on-day (+19.85%), to 460.270 p/th. TTF ICE April 2022 prices were up by €31.73 (+19.73%), closing at €192.550/MWh. On the far curve, TTF ICE Cal 2023 prices were down by €2.90 (-3.70%), closing at €75.421/MWh.

In Asia, JKM spot prices dropped by 19.70%, to €147.811/MWh; April 2022 prices dropped by 10.23%, to €120.703/MWh. By contrast, May 2022 prices increased by 23.78%, to €173.575/MWh.

TTF ICE April 2022 prices reached an all-time high at €213.895/MWh on Friday. They are massively up again this morning, up to an intraday high at €335/MWh at the time of writing as market players may already price a complete halt in Russian gas flows to Europe. TTF ICE Q2 2022 prices are trading at €322.00/MWh, +€134 compared to Friday. These levels cannot be explained by any known fundamental price. In a world of scarcity, they reflect the panic buying of physical players who have to cover their short-term needs but also now of players who have to fill their storages. If the Commission’s strategy pays off, these high prices will increase supply in Europe, destroy demand and allow stocks to be filled…and guarantee us a comfortable supply and lower prices for next winter. Many conditions for this scenario to hold! One of them is that Asian buyers will not outbid. If they outbid, we will see again fierce competition between the two zones, with in the end a double pain: higher prices in Europe and in Asia, without additional supply.