Benchmark European Gas Prices Follow Lower US Market

The Dutch and British wholesale prices of gas fell on Tuesday, reversing gains made earlier and following the declines in the United States. Prices fell about 13% after production began to recover from the recent winter storm.

The freezing weather in the United States had put a strain on energy infrastructure, and more than 548 000 homes and businesses were left without power. The storm would be the most expensive severe weather event since wildfires that ravaged the Los Angeles region early last year.

The benchmark European contract, the front month?Dutch at the TTF Hub, traded at over 40 euros per megawatt-hour (MWh) in the morning of Tuesday, but fell 0.92 euros to 38.78 euros per MWh or $13.60 per mmBtu by 1612 GMT.

The British day-ahead contract fell by 0.73 pence, to 100.57 pence a therm. Meanwhile, the front-month contracts dropped by 2.68 pence each to 100.70?therm. The United States is Europe’s largest LNG supplier, and a return of supplies there has helped ease fears over LNG exports to Europe.

"Weather development and U.S. export dynamics will likely remain the main drivers of price direction in the coming days," said LSEG Analyst Wayne Bryan.

U.S. power and natural gas prices have reached record levels in the Northeastern part. This is because homes and businesses are turning up the heat while the gas production has been cut by a two-year minimum due to the freezing of oil and gas pipes and wells.

Analysts at ING wrote that "in recent days, U.S. LNG plant have reduced their gas intake by a significant amount, estimated to be down around 48 percent, which will translate in reduced LNG exports."

Dutch TTF continues to trade at a healthy price premium over Asian LNG in order to ensure that LNG cargoes are moved into Europe where storage is now less than 45% filled.

It's becoming more likely that the storage will not be able to meet its 25% capacity by the end of 25/26 heating seasons. This would be lower than levels in 2022, ING stated.

The benchmark contract on the European carbon markets was up by 1.24 euros, at 88.38 euro per metric ton. Reporting by Nina Chestney, Susanna Twidale and David Goodman.

(source: Reuters)