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Dutch TTF prices hit all-time high, with no signs of slowing

Highlights

TTF front month opens at Eur230/MWh on Aug 16

Difficult to understand this market: trader

Winter 23 contracts up 51% since July 1

European natural gas assessments at the benchmark hub the Dutch TTF, reached an all-time high on Aug. 15 on tight supply and uncertainty over future gas supply security.

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The full curve saw bullish gains pushing both spot prices and futures to new highs. Spot moves hit highs as market participants aim to secure supply for gas storage filling for the winter heating period as well as meeting the hub demand. Further out, the sentiment remains that high prices are here to stay as keen traders place greater interest on contracts far out on the curve to secure cheaper gas delivery contracts.

The Dutch TTF front month closed the Aug. 15 gas trading day at Eur221.475/MWh, posting a Eur15.475/MWh gain on the day. The price on the day hit 4.2% above the previous record price seen in March 8 when prices reached Eur212.15/MWh following Russia's invasion of Ukraine.

However, there does not seem to be any slowing in the bullish action, as the TTF front month opened the Aug. 16 trading session at Eur230/MWh at 0603 GMT. Despite a small easing to Eur224/MWh at 0720 GMT, prices quickly gathered pace with exchange data showing the most recent front month price at Eur234/MWh at 1015 GMT.

Further out on the curve, pressure remains on securing Winter 22 deliver contracts should supply tighten further as demand will hit its winter high. Platts assessed the Winter 22 contract at Eur225.55/MWh on Aug. 15, increasing 12.6% since the start of August.

Market participants are "mind blown," one Switzerland based trader said. "I stopped understanding this market since this last bullish move," he said. "These days anything with a 5 million cu m/d impact will have a Eur5/MWh impact on price."

With more heightened volatility than ever seen before in the gas market, traders are expected to take advantage of the day on day moves. "Buying at Eur230/MWh?" the trader said. "No logic for fundamental traders."

Any small change in European supply is adding further pressure to an already tight market.

Bullish pressure came from subdued supply from the Norwegian Continental shelf as maintenance at Troll gas field began on Aug. 15 which is expected to span the full month of August. Furthermore, low River Rhine levels are causing issues in transporting fuel to German power stations resulting in further stress on pipeline transported gas.

One interesting take on the bullish rally was, "I think governments are doing everything to push it up, I'm guessing to encourage energy saving measures but is working as a spook technique for the market to go into outright buying mode," the trader said.

This comes as the European Commission introduced a voluntary demand reduction target of 15%. Some hubs have agreed to surpass this level like Germany who have agreed to try to reduce demand by 20%, however Italy has only agreed to a 7% demand reduction. As this is not mandatory, participants are questioning whether this is enough to ease pricing and could more be done to ease supply woes.

Moreover, buying interest remained for year ahead with 2023 seasonal contracts spiking to their new high, TTF Summer 23 hit Eur197/MWh up 50% since the start of July. Winter 23 also saw a 51% increase since the start of July hitting Eur183.7/MWh on Aug. 15.

Platts is a part of S&P Global Commodity Insights.