Gas markets start to test new, and very soft, floors
Prompt markets experienced a short spell of support at the start of January, a rare event in W-18, as temperature forecasts pointed lower for the back of the month. This was short-lived, and with temperatures and the near forecast moving above normal across Europe in February we’ve seen prices resume their downward trend. With Russian gas into NW Europe, NCS and LNG sendouts all at multi-year or all-time highs, it’s hardly surprising prices continue to fall. What’s new is the dramatic shift in the shape of the curve, as the market starts to submit to our long-held view of an incredibly long Summer-19 balance. Not only has the TTF Summer-19 discount to Winter-19 opened up to €3/MWh (7.6ppth), as wide as we’ve seen it in recent years and almost three times its width at the start of winter, we have also seen backwardation finally fall out of the longer-term curve. Summer-19 NBP, TTF, and NCG all gave up their long held premiums to Summer-20 last week, as the market starts to test just how soft the floor really is. Higher LNG sendouts since October have largely been accommodated by offsetting winter-to-date storage withdrawals. However, as storages start looking close to full again early in Summer-19, something else will need to give.