As winter approaches, gas prices are becoming increasingly sensitive to the level of demand. This factor, by its market impact, often proves to be crucial in Q4 and Q1 because strong consumption is contributing to higher withdrawal rates from UGSs, thereby creating a sort of additional storage ‘safety reserve’ if supplies go up sharply.
The last decade of November has been marked by a sustainable rise in prices at European hubs on the back of vibrant demand among major consumers. And the consumption throughout the period was largely covered by storage inventories.
European gas withdrawals accelerated amid narrowing spread between prompt and front-quarter prices, with the figure standing at only EUR0.30/MWh on average from 16 to 27 November. In comparison, the price difference amounted to about EUR1.00/MWh for the same period last year.
Although 2021 has clearly demonstrated how inaccurate can be even short-term predictions, one may expect that the existing uncertainty around Q1 ’21 prices is likely to remain in the coming weeks. If the temperature does not rise significantly in NWE, there are not so many reasons for the withdrawals to slow down in early December.
Source: Yakov Grabar
See original post by Yakov on LinkedIn.