Investing.com — European gas futures plunged on Monday in early trading after the weather forecasts for warmer-than average weather in Europe over the next week.
After opening at a new low of 100 EUR/MWh for four months, front-month, which are a benchmark for north Europe, had dropped more than 10% to 101.39 Euros per megawatt-hour by 04:45 ET (08.45 GMT).
Weather forecasts indicated that temperatures in Europe this week will be between 4-8 degrees Celsius higher than the seasonal average, which translates into lower demand. It also allowed importers to continue to inject excess gas into storage.
Europe’s mild start to winter heating season has combined with aggressive buying of liquid natural gas on spot market markets has allowed it to fill its storage facilities ahead-of-time, lessening the pressure from Russia’s effective shipment halt.
Sunday’s figures showed that the EU storage facilities were 93.4% filled, with Italy and Germany, the two largest markets on the continent, recording even higher levels.
Spot prices are falling sharply due to a lack of storage, Ole Hansen, a Saxo Bank analyst, stated via Twitter. He warned of a possible “short-term price crash”.
However, longer-dated contracts suggest that markets expect current weakness to be temporary. TTF prices for next year’s first quarter trade at 144.64 EUR/MWh while prices for the entire 2023 calendar year trade around 142.43 EUR/MWh. This is due to the fact that Europe will likely face a full year without Russian Gas next year if the conflict in Ukraine continues. It will have to make larger and more frequent purchases on the spot market through 2023.
Alexander Stahel, a Swiss-based consultancy Burggraben, stated that LNG cargo owners know winter is coming. He noted that LNG tankers are being stored offshore in anticipation of colder temperatures, which will increase demand and allow for storage capacity to be freed up. Instead of redirecting them to other markets, Stahel stated that this is tightening the global markets.