European natural gas prices plummeted to their lowest levels since July as bearish market fundamentals – mild, shoulder season weather, brimming storage and improving supplies from Norway after planned maintenance – continued to assert themselves.
The October TTF contract was down 3.9%, from USD 11.57/MMBtu on Friday to USD 11.12/MMBtu, but moving upwards in early trading on Tuesday. NBP fell even more sharply, by 4.7%, from USD 11.25/MMBtu to USD 10.73/MMBtu.
The falls were even steeper in local currency because of foreign exchange impacts – 4.4% for TTF and 5.4% for NBP – and effectively bring to a close a period of elevated prices in the wake of Ukraine’s incursion into southern Russia in the first week of August.
In Asia, the month-ahead JKM LNG benchmark matched the falls in Europe, with a 4.0% decline, from USD 13.67/MMBtu to USD 13.13/MMBtu.
This larger-than-usual fall was a result of the expiry of the October contract on Friday, with November now the front month. Sharp changes in month-ahead JKM prices often happen as one contract expires and another becomes the front month.
The TTF-JKM spread narrowed slightly to USD 2.01/MMBtu but that still means that Asian markets look more attractive than European ones, even allowing for shipping costs in most cases.
US gas prices – driven by a different set of market fundamentals – went their own way, up 3.0%, from USD 2.31/MMBtu to USD 2.37/MMBtu, their highest month-ahead close since early July.
Factors pushing the price higher include a rise in LNG export volumes after the disruptions of last week’s hurricane Francine and warmer weather in southern states, which has boosted demand for air conditioning.
The underlying month-ahead trend has been upwards since prices dipped below USD 2/MMBtu in the final week of August. Looking ahead, the December Henry Hub contract is currently at USD 3.06/MMBtu, with January at USD 3.33/MMBtu.
Crude oil prices continued to recover from weeks of decline, with Brent up 1.6%, from USD 71.61/barrel to USD 72.75/barrel, and WTI up 2.1%, from USD 68.65/barrel to USD 70.09/barrel.
Prices were back on a downward trend on Tuesday morning as traders awaited a decision by the US Federal Reserve on interest rates, with the Federal Open Market Committee due to meet tomorrow.
A cut this month has been priced in, following remarks by Jerome Powell, chairman of the Federal Reserve, at the recent Jackson Hole symposium. The uncertainty is now around how large it will be – a quarter or half a percentage point.
A decision on interest rates by the Bank of England is due on Thursday, with the consensus being no change after a cut of a quarter of a percentage point in August.
Meanwhile, concerns about the global economic outlook continue to weigh on oil prices.
European coal and carbon prices moved down with gas. API2 coal fell by 1.3% to USD 4.51/MMBtu while EU carbon dioxide emissions allowances were down 2.7% to EUR 62.67/tonne, the lowest closing price since April.
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WTI, NBP, TTF and EU CO2 data from ICE. Henry Hub, JKM and API2 data from CME. Prices in USD/MMBtu based on exchange rates at last market close. All monetary values rounded to nearest whole cent/penny. Text and graphic copyright © Gas Strategies, all rights.
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