Europe Q1 2022 prices dropped to more “rational” levels

European gas spot and Q1 2022 prices dropped yesterday, pressured by profit taking and the drop in Asia JKM prices (-4.30% on the spot, to €129.878/MWh, -7.09% for the February 2022 contract, to €138.653/MWh). By contrast, Q2, Q3 and Q4 2022 prices were up, reducing the spread against Q1 2022 prices as ongoing weak stock levels should lead to a strong injection demand next summer (and an extension of the competition with Asia to attract LNG cargoes). On the spot pipeline supply side, Russian flows stabilized at weak levels yesterday, at 251 mm cm/day on average, compared to 252 mm cm/day on Tuesday, with Mallnow flows remaining in reverse mode. Norwegian flows were almost stable, at maximum levels, averaging 351 mm cm/day, compared to 350 mm cm/day on Tuesday.

At the close, NBP ICE January 2022 prices dropped by 19.380 p/th day-on-day (-4.29%), to 432.340 p/th. TTF ICE January 2022 prices were down by €7.39 (-4.10%) at the close, to €172.875/MWh. On the far curve, TTF Cal 2022 prices were up by €1.97 (+1.43%), closing at €139.644/MWh.

TTF ICE January 2022 prices reached a low below the 5-day High yesterday, but managed to close above this level. This morning, they are falling below, but the 5-day average is lending them support. Will the market stay focused on weak Russian flows or will it begin to be sensitive to the increase in LNG flows to Europe (following the easing of the Asian market)? Depending on the answer to this question, the market will trade closer to the 5-day High (at €169.33/MWh today) or the 5-day Low (at €142.57/MWh today).