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Europe’s benchmark gas prices have rebounded this week as traders closed short positions at the expiry of the front-month contract and some weather forecasts suggested colder weather in northern and central Europe next week than previously expected.
The Dutch TTF benchmark price jumped by 11% at over $65 (60 euros) per megawatt-hour (MWh) at the opening of trade in Amsterdam on Tuesday, extending small gains from Monday and recovering some of the losses from last week, when prices slumped by 17%.
On Monday, the prices were supported by short covering and an unplanned outage at a Norwegian gas processing plant. However, wind power generation is still expected to be strong, which could curb some demand for gas-fired power generation.
But next week, temperatures could be lower than initially expected, which would boost demand for household heating. Colder spells are set to return to northern and central Europe next week, according to weather models by Maxar Technologies Inc, cited by Bloomberg.
Still, the record gas prices in Europe could be behind us, according to ING’s revised outlook on natural gas for this year.
“Mild weather and weak industrial demand have ensured that gas storage has remained strong. The region should get through this winter comfortably and prospects also look better for the 23/24 winter,” Warren Patterson, Head of Commodities Strategy at ING, said on Monday.
The bank expects the TTF price to average around $65-70 (60-65 euros) per MWh over the first half of 2023—around current levels, before increasing to $81-87 (75-80 euros) per MWh over the second half of the year.
“The more comfortable storage situation does put Europe in a better position to handle the 2023/24 winter. It certainly isn’t looking as dire as it did just several months ago. Therefore, prices do not need to go as high as originally expected going into the next heating season,” ING’s Patterson said.