Mixed price evolution

European gas prices were mixed yesterday, torn between conflicting fundamentals. Russian flows dropped yesterday, averaging 221 mm cm/day, compared to 225 mm cm/day on Friday. Monthly auctions for gas transportation capacity saw no rights allocated for transport through Ukraine for June delivery, while month-ahead auctions on the Yamal pipeline were canceled, On their side, Norwegian flows were stable at 319 mm cm/day on average yesterday. The rise in coal prices (+3.29% for API2 1^st nearby prices, +2.64% for Cal 2023 prices) lent some support to far curve prices.

Note that the European Commission has confirmed how European Union companies can pay for Russian gas without breaching the bloc’s sanctions against Russia. In updated guidance, the Commission confirmed its previous advice that EU sanctions do not prevent companies from opening an account at a designated bank, and companies can pay for Russian gas – so long as they do so in the currency agreed in their existing contracts and declare the transaction completed when that currency is paid. Companies should make a “clear statement” saying that when they pay euros or dollars, they consider their obligations under existing contracts to be fulfilled, the guidance said. By ending its obligations once it deposits euros or dollars, a company could avoid being involved in dealing with the Russian central bank, which is under sanctions, and which could have been involved in converting the euros to rubles.

At the close, NBP ICE June 2022 prices increased by 23.810 p/th (+16.04%), to 172.260 p/th, equivalent to €69.424/MWh. TTF ICE June 2022 prices were down by €4.02 (-4.15%), closing at €92.860/MWh. On the far curve, TTF ICE Cal 2023 prices dropped by 62 euro cents (-0.79%), closing at €77.794/MWh. 

In Asia, JKM July 2022 prices dropped by 7.38%, to €65.505/MWh.

The rise in coal prices pulled the maximum coal switching level to €102.00/MWh yesterday (up from €99.51/MWh on Friday). But, with improving spot fundamentals, the market probably has in mind now the average coal switching level at €77.79/MWh. Yesterday, TTF ICE June 2022 prices closed slightly above our S1 support level, but this support is being broken this morning. Unless there is a major fundamental change, a drop to the 5-day Low seems on track.