Summer contract price development in early 2021 is perhaps the most accurate indicator of where the European gas market stands in the run-up to the forthcoming injection season.
From the beginning of the year, the summer product has been reassessed remarkably against the prompt contracts in response to a rapid decline in UGS stocks. The occupancy rate of the European storages fell below the 2015-19 average on 12 February and has remained there ever since.
The ongoing rebalancing of the gas market has captured the hearts and minds of players to such an extent that the recovery of seaborne supplies to Europe in fact did not affect Summer ’21. Yet European LNG imports are expected to stay high at least in April and May, given the tight JKM-TTF spread amid a seasonal decline in demand from Asian buyers.
The question is whether the storage factor can further outweigh downside risks. On the one side, gas stocks in Europe keep declining, albeit at a considerably slower pace, which adds ground for optimism about the injection demand. On the other side, as the gas winter is nearing its end, more LNG will be directed for restoring the balance in the regional market, not for meeting the current demand.
Source: Yakov Grabar
See original post by Yakov at LinkedIn.