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European Gas Prices retreat further from 6-week highs

European gas prices dropped further on Wednesday from the previous session’s six-week highs as the prospect of milder weather and ample near-term supply offset the impact of a growing Asian appetite for the fuel.

The benchmark front-month Dutch TTF contract traded last down EUR 0.51 at EUR 28.36/MWh on Ice Endex. The contract on Tuesday hit its highest since 5 February of EUR 29.75/MWh. The equivalent UK NBP contract was 0.56p lower at 73.14p/th, after reaching its highest since mid-January in the previous session of 76.06p/th.

A commodities analyst with a UK investment firm said it was “hard to say” whether the market had reached a ceiling for the time being.

While there could be short periods of colder weather over next four weeks, “the chance for really warm weather is generally larger”, said forecaster SMHI.

“The weather is bearish but it seems that Asia might be tightening somewhat,” the analyst said, pointing to reports of heightened LNG spot demand in the Pacific basin, potentially drawing supply away from the Atlantic.

Already, combined LNG deliveries to Japan, South Korea and China were seen rising this month by around 1.4% from February’s total to 21.5bcm, while imports by European buyers – including Turkey – could drop 1.4bcm to 12bcm, according to provisional Kpler data.

Supply side issues
At the same time, Australia’s ANZ Bank pointed to ongoing support from “supply side issues”, in particular regarding a protracted partial outage at the key US Freeport LNG terminal since January.

“Flows from the Freeport LNG export facility [remain] constrained following one production line going down,” it said.

But there was no dearth in near-term supply for the European market with Norwegian nominations assessed today at 332mcm/day, up from below 325mcm/day on Tuesday, TSO Gassco data showed. And EU-wide inventory levels were pegged last at 60% of capacity, which compared with around 56% a year ago, according to latest Gas Infrastructure Europe figures.

Reporting by: Laurence Walker