Discounts to TTF May contract grow amid strong LNG supply, limited pipeline gas exports

European gas hubs with discounts to the benchmark TTF May contract have seen their discounts grow in recent days on the back of strong arrivals of LNG volumes and limited appetite from market participants to move gas across borders, traders told S&P Global Commodity Insights.

For example, the NBP May contract was assessed at 145.125 pence/therm (Eur58.825/MWh) on April 27, a discount of Eur46.675/MWh when compared to the TTF equivalent after having been assessed at an Eur7.745/MWh discount on April 1 and a 85.4 euro cent premium on March 1, data from S&P Global Commodity Insights showed.

The Spanish PVB May contract closed Eur23.50/MWh lower than the TTF equivalent, with the discounts to TTF for the French PEG hub at Eur18.10/MWh and the Belgian ZTP hub at Eur17.20/MWh after having all been within Eur5/MWh of the TTF prompt contract at the beginning of the month.

Solid LNG deliveries into these countries has been the prime reason why these hubs enjoy such large discounts to the TTF hub, where demand from Germany for gas has been strong on the back of the reduction in Russian gas flows into the country.

With Gazprom having ceased gas deliveries to both Poland and Bulgaria on April 27 for non-payment for gas supply in rubles, flows of gas from Germany into Poland are set to remain elevated in the short-term, further supporting hub prices in central and eastern Europe.

A Spanish gas trader told S&P Global that the PVB market had "only sellers, no buyers" due to the firm LNG regasification rates and amid market participants assessing the news of the regulated power price in the region.

Despite the large discounts in certain hubs currently seen over both the TTF and THE hubs, flows of gas towards these areas has been somewhat limited overall.

Responding to whether gas could flow eastward from these discounted markets with wider access to LNG volumes, a Germany-based gas trader said "it should, but we have seen in the past that it does not. Flows do not always go where the highest prices are."

The Germany-based gas trader added that "it could be that they fill up their own storages first and do not care for the margins they could make. In the end, it is we first solve our problems and then we see what we can do for others."

Countries in the European Union have been regulated to reach 80% capacity for storage volume by the beginning of November, spurring huge interest in storage injections and supporting spot and prompt pricing at the beginning of the Summer 2022 delivery period.