TTF gas tumbles 10% on warm weather, bulging inventories

Quantum Commodity Intelligence – European natural gas prices were sharply lower Tuesday, with markets focusing on localized fundamentals having seemingly priced-in fears over shortfalls from the Mediterranean.

Temperatures remain above seasonal averages across most of Europe, while storage tanks are at around 99% full, which is effectively at operational capacity.

Benchmark TTF futures for Dec23 in late Tuesday trading were nearly 10% lower on the day at just below €48/MWh, while the key winter contracts for Jan24 and Feb24 retreated by a similar percentage to around €50/MWh.

Spot prices had gained 5% in the previous session after Egyptian officials said natural gas imports had dropped to zero following the closure of the Tamar gas field, compared to the previous level of 800 million cubic feet per day.

The suspension of production from Israel's Tamar gas field has tightened supplies in the East Mediterranean and North Africa, in turn slashing Egypt's LNG supplies to Europe.

But with European storage essentially at tank tops and offtakes relatively low, the region is already well supplied by flows of US and Qatari LNG.

Additionally, wind power is on the increase for this week, while solar generation is healthy for the time of year.

Meanwhile, European officials are considering an extension to the emergency price ceiling on gas that was introduced earlier this year.

In February European Union energy ministers introduced measures to trigger a cap if TTF prices exceed €180/MWh for three days – a level more than three times current spot prices.

However, analyst says the Eurozone market remain vulnerable to short-term price fluctuations as it enters a second winter with sharply reduced supplies of Russian pipeline gas.

An extended cold period, sabotage to existing pipeline supplies or an escalation of the Middle East war impacting LNG shipping routes from Qatar could lead to massive spike in TTF prices, say market watchers.