Market Overview

Gas prices in Europe have been hovering around summer 2021 lows since mid-February, gradually edging lower from 52.59 Euros on February 14 to 47.42 Euros per MWh at the end of February.

The end of winter and relatively warm weather conditions, together with high gas inventories in Europe, lowered the demand for fuel. The reopening of Freeport LNG in Texas eight months after an explosion in the facility may likely lower import LNG prices for Europe. A strengthening U.S. Dollar and rising Treasuries’ yields may also put pressure on gas prices.

However, prices are not inclined to dive deeper as traders expect the situation may change in the coming months. Low gas prices make production based on gas fuel lucrative compared to other fuels. The rising demand for gas in Asia is likely to redirect some gas deliveries to the region. International Energy Agency chief, Fatih Birol, warned that the European Union energy war with Russia is not over as Russia may suddenly cut gas deliveries from the remaining 20% left from February 2022. This gas, which is delivered via Ukraine and Turkey, may lower gas inventories replenishment opportunities this summer. Lower gas prices may also reduce the chances of a recession in Europe. If the recession is avoided, the economic contraction would be reversed and gas fuel demand will be higher.

The Consumer Price Index in the Eurozone will be an important factor for gas prices this week. Consumer prices are expected to slow down to 8.2% in February compared to 8.6% a month before. If prices continue to lose momentum this will be another argument against the recession and monetary tightening by the European Central Bank (ECB). This will clearly support gas prices. The ECB’s account of the Monetary Policy Meeting that will be published on Thursday may contribute to gas price volatility.

Gas Prices may not dive below the support level of 40 Euros per MWh and continue to move within the 40-60 Euros range.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.