Market Overview

Gas prices in Europe continue to go down reaching 109.68 Euros per MWh for December. At the beginning of this week, Dutch TTF Gas futures  were down from 123.35 Euros a week before and this is more that 68% lower than peak prices of $349.87 at the end of August. On the storage front, gas storages are filled way above average levels. Belgium is at full capacity, Germany has reached 98% while France is at 99%. More than 30 gas tankers are stationed at ports along Europe’s coastline where they are unloading their cargo while 30 more are on their way to Europe. Large gas deliveries, together with low consumption level during warm months of October and November in Europe, is creating a surplus of gas.

According to EU internal market commissioner Thierry Breton, European nations have agreed on mutual gas purchases to limit gas prices.

Exports and imports in China fell by 0.3% year-on-year and 0.7% y-o-y respectively. They rose in September and during previous months so a decline of trade volumes in China was surprisingly unexpected. This decline is a negative factor for energy prices as it may be interpreted as the beginning of the global recession.

Considering this, October inflation data will probably be of elevated interest. It is expected that inflation in China could decline to 2.4% year-on-year in October from 2.8% in September, while producer prices are estimated to fall deeper to -1.6% from 0.9%. This might be alarming as it could point to a drop of demand in China and possible economic slowdown.

October inflation data in the United States, which will be published this week, will provide some understanding around  the Federal Reserve’s (Fed) monetary tightening policy. Consumer prices in October are expected to slow down to 8% from 8.2% a month before, and that is a positive factor for energy prices. The European Central Bank’s (ECB) officials may also add some clarifying notes to the monetary landscape in Europe to paint the picture of future economic developments in the European nations.

Meanwhile, gas prices may continue to go down to test the 95 Euros per MWh landmark. The resistance level is still at the 123 Euros per MWh.

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