Sharp price drop on milder weather and higher LNG supply

European gas prices dropped significantly yesterday, pressured by milder weather, higher LNG supply and profit taking. Prices have even ignored the drop in Russian supply to 236 mm cm/day on average (compared to 251 mm cm/day on Wednesday) due the drop in flows via Ukraine, while flows via Poland into Mallnow remained at 0. On their side, Norwegian flows stabilized around their maximum levels, averaging 351 mm cm/day. Asia JKM prices sent mixed signals: +4.53% on the spot, to €135.761/MWh, -15.62% for the February 2022 contract, to €116.992/MWh.

At the close, NBP ICE January 2022 prices dropped by 106.740 p/th day-on-day (-24.69%), to 325.600 p/th. TTF ICE January 2022 prices were down by €40.30 (-23.31%) at the close, to €132.579/MWh. On the far curve, TTF Cal 2022 prices were down by €27.33 (-19.57%), closing at €112.313/MWh.

We expected the 5-day Low to lend support to TTF ICE January 2022 prices yesterday. But they crossed this level as expectations of higher LNG flows to Europe (following the easing of the Asian market) finally exerted strong downward pressure. It is important to notice that prices closed around the 20-day High, initiating the start of “normalization”. As a reminder, their “normal” path is to trade inside the 5-day range, with the latter lying inside the 20-day range. According to this “normalization” criterion, prices have additional downward potential in the short term, and actually they are down again this morning. However, the 20-day Low (currently at €99.49/MWh) could be difficult to reach, unless Asia JKM prices drop further.