European natural gas prices saw renewed strength yesterday with TTF settling almost 2.7% higher on the day. Forecasts for colder weather have raised concerns that we will see steeper draws in gas storage in the coming days, ING’s commodity analysts Warren Patterson and Ewa Manthey notes.
“Speculators also appear to remain supportive towards the market current gas prices leave us deep in with the latest positioning data showing that investment funds increased their net long by 5TWh over the last reporting week to 283TWh. However, with the investment fund long making up more than 31% of total open interest, the position is starting to look a bit stretched.”
“In addition, current gas prices leave us deep in the gas-to-coal switching range for the power generation sector, while LNG cargoes should continue to be diverted towards Europe, with European prices trading at a premium to Asia through until the end of the summer. This all suggests we could be due a pullback in the absence of any surprises.”
“The latest positioning data also shows that speculators increased their net long yet again in EU allowances (EUAs). Investment funds increased their net long by 2.5k contracts over the week to 55.57k contracts – the largest net long held since September 2021. EUA prices have moved significantly higher this year, breaking above EUR80/t, supported by the strength seen in European gas prices. However, demand may provide resistance further ahead, particularly if we see an escalation in trade tensions.”
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