As the TTF front-month hit €60/MWh, it is the time to look back and see what expectations players had with regard to 2021 natural gas price development not so long ago. Even market veterans have probably never observed such a rapid revaluation of the forward curve, which, as recently as early April, did not provide indications that something so weird was about to happen in the second part of the year.
Between January 2020 and late March 2021, the Summer ’21 contract at the TTF hub rose by about €6/MWh, while the Dutch Q4 ’21 product gained only €2/MWh. Now, when prices can easily go up or down by €5/MWh in just one day, the change in price by ‘only’ €2/MWh within a 15 months period seems pretty unusual, to say the least.
When entering the summer 2021, forward price expectations of both market participants and external analysts did not meet the realities of future periods because hardly anyone could then predict how perfect the storm would be in Q2 and Q3. It took a few months to gain an understanding of the seriousness of market conditions, which resulted in the Q4 ’21 contract increasing by 3.5 times from late April to mid-September 2021.
Since April, the fire burning in the gas market has only become stronger. Lower Norwegian exports in May due to heavy maintenance, high fuel consumption to run cooling appliances amid the world’s hottest July in recorded history, ‘Fit for 55’ legislation package release, LNG demand remaining robust from Asian and Latin American importers throughout the whole summer, reduced Yamal flows following the August accident at the Novy Urengoy processing facility − that is far from being a full list of things the last six months were filled with.
Clearly, the market should not find some peace after summer season ends. Quite the contrary, more market volatility expected ahead due to intensification of the Nord Stream 2 saga and uncertainty over LNG distribution between key importing regions, accompanied with winter weather forecasts which will be the focus of everyone’s attention amid limited gas storage levels in Europe. Things are just getting interesting.
Source: Yakov Grabar
See original post by Yakov at LinkedIn.