Gas market to remain bearish

The European gas markets are already at the lowest level in several years. Nothing suggests that any noticeable improvement is on the way.

We currently see extremely low prices on the European gas markets. When the November contract on the Dutch TTF hub was delivered it was at a price of 13,40 EUR/MWh, which is almost half price of what the corresponding contract was delivered at last year. Meanwhile, the annual contract for 2020 is currently traded at the lowest price in more than one and a half year.

The low prices on both the short and the long end of the market are the result of high LNG import to Europe and continuously strong flows from Norway and Russia. This has meant that the European gas storages have been filled up over the year, where demand has been low. In week 44, the total level in the German gas storages was 99.6 %, which is the highest level ever seen since 2011 when data on this matter was first published.

Even though demand will likely increase during the coming months, where temperatures are expected to fall, prices will most certainly not rebound to anywhere near seasonal normal. If temperatures stay around normal we only expect modest increases during the rest of the year. It is a buyers’ market at the moment with the gas storages filled to the brink, and this will likely not change anytime soon.

During the last week, the downside on the market has strengthened further, as Denmark has now approved that the Nord Stream 2 gas pipeline between Russia and Germany can run through Danish waters south of Bornholm. Nord Stream 2 is expected to start operation next year, where the Russian gas will get an easier path towards Western Europe than through the unstable Ukraine.