The TTF Natural Gas price continued to slide this week. The 1-month forward is currently trading below EUR 27 per MWh, which is the lowest level in 20 months, Commerzbank's commodity analyst Carsten Fritsch notes.

EU Gas storage levels remain critically low

"Gas storage levels in the EU are significantly lower than last year and lower than usual for this time of year, at 74%. The situation is even more critical in Germany, where Gas storage levels are only at 65.6%. The reason given for the complacency of market participants is the significantly milder temperatures expected in the coming week and abundant (LNG) imports." 

"However, this is a very short-sighted view, as winter has only just begun and is likely to bring several more cold spells. BNEF estimates that, based on average withdrawals over the last ten winters, Gas levels in the EU would fall to around 30% by the end of winter. However, a cold spell at the end of December would be enough to cause levels to fall to 28% by the end of March."

"With the recent rise in US Natural Gas prices to a three-year high of the equivalent of EUR 14.8 per MWh, the price difference between TTF and the US Henry Hub price is at its lowest level in three years, making US LNG deliveries to Europe less attractive. This is because the costs of liquefaction, cooling, and transport must also be taken into account, which are likely to consume most of the current price gap. The relaxed attitude of market participants could therefore be delusive when the next cold spell arrives and LNG deliveries to Europe are lower."