Market Overview

31 May 2022

Gas Prices are Rapidly Increasing After Russia’s Oil Ban in the EU

Dutch TTF July 22 gas futures soared above 93 Euros per 1 MWh, an important psychological resistance level, and hit 95 Euros on Tuesday morning. This may indicate that prices may surge further.

Prices surged after European leaders agreed in principle to cut about 90% of oil imports from Russia by the end of 2022 raising Brent crude prices above $120 per barrel. Gas is an alternate fuel and its prices followed oil quotes. Moreover, some EU nations have rejected gas payments in Russian Rubles, which has contributed to the price increase along with European gas storage facilities that are filled with 45% of their capacities. The shortage of gas rises its prices.

Rising inflation in the Eurozone to 8.1% year-on-year in May and falling gas supplies are the primary upside factors for gas prices. PMI readings and the unemployment level in Europe may contribute to price movements as the European Central bank (ECB) may tighten its monetary policy even further if data from these reports show strong increases. ECB’s President Christine Lagarde’s speech on Wednesday will be of particular interest in this regard.

However, demand and supply  will most likely be a key factors for gas prices. Demand may rise significantly in the second half of 2022 as European gas storage facilities are needed to be filled to 80% before the winter heating season. The alternative is expensive liquid gas supplies that would push prices up.

So, all in all, prices may rise first to May peaks at 116 Euros per 1 MWh. If this level is broken through, prices may soar to 275 Euros. The 93 Euro level has now become a support for gas futures.

 

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.

Mark Goichmann
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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