TTF front-summer gas price moves above front-winter

Market: Natural gas
30/10/24

The Argus TTF summer 2025 gas contract moved above the winter 2025-26 market yesterday for the first time since February last year.

The TTF summer 2025 contract closed at €40.86/MWh yesterday, a premium of €0.505/MWh to the winter 2025-26 price. This spread had narrowed sharply in recent weeks, with TTF prices rising from the front of the curve.

Winter gas contracts typically hold a premium to summer prices, reflecting higher demand in the colder season. This differential provides a commercial incentive for firms to book and fill underground storage capacity. But this seasonal shape of gas prices has on occasion been inverted in recent years, with the curtailment in Russian flows and mandatory storage targets at times bolstering summer prices.

Growing expectations that European storage inventories will be drawn down more heavily this winter than in the previous two years has supported the front-summer contract in recent weeks, but not the front-winter price. The EU's storage law mandates member states to fill 90pc of their storage capacity by 1 November 2025, in theory guaranteeing high inventories at the start of next winter regardless of the winter 2024-25 stockdraw.

EU storage sites were at 95.3pc of capacity as of yesterday morning, down from 98.8pc a year earlier, according to the latest data from the GIE transparency platform. There have been some days of net EU storage withdrawals since 1 October — there was a run of four days of withdrawals on 22-25 October, and seven in total so far this month. In 2023, there was just one day of muted net withdrawals in September before the stockdraw began in earnest on 7 November.

And there have already been consistent withdrawals in some countries, notably the Netherlands. In addition, Denmark will miss the 90pc 1 November target, with the Danish Energy Agency informing the EU it could still reach the target by the start of December.

And greater competition between Europe and Asia for uncommitted US LNG cargoes this winter may curb Europe's LNG imports and increase the call on European storage. Record-low freight rates helped to re-open the arbitrage between Europe and Asia for US LNG for a period in the middle of the month, before it shut again in recent days.

On top of rising expectations of a heavier stockdraw than in recent winters, additions to liquefaction capacity next summer will be slower than previously expected.

The developer of the US' 18.1mn t/yr Golden Pass in August delayed first LNG to the end of 2025, from a previous date of mid-2025. A contractor on the project had already filed for bankruptcy in May.

Market participants are also concerned about a potential delay to the commissioning of the 27.2mn t/yr Plaquemines terminal, although there is yet to be confirmation of a change to the timeline. The facility is scheduled to start exports by the end of this year, developer Venture Global said earlier this month.

And US LNG developer Cheniere said in August it expects to deliver first feedgas to the 11.45mn t/yr Stage 3 expansion at the 17.4mn t/yr Corpus Christi terminal by the end of November. Cheniere will release its third-quarter results tomorrow.

Market participants further attributed the summer 2025 market flipping to a premium to the winter 2025-26 contract yesterday to traders looking to limit losses and deciding to, or being forced to, get out of their positions. This may have amplified the effects of fundamentals factors behind the narrowing spread in recent weeks.

Implications for storage

A sustained inverted seasonal spread would provide no incentive for firms to fill storage and could even lead to governments having to step in, as happened in summer 2022.

The third stage of Germany's gas storage law foresees market area manager Trading Hub Europe (THE) filling sites as a last resort if market participants fail to do so. Germany has the largest working gas capacity in the EU.

And in the Netherlands the Dutch government will oblige state-owned holding company EBN to fill storage again in summer 2025 if market participants do not.

Governments stepping in to fill storage in 2022 came with significant consequences. THE purchased 50TWh of gas in summer 2022 on the spot market, without hedging it forward. It bought this gas at an average price of around €175/MWh, introducing its controversial gas storage levy in order to recoup the costs and may be reticent to repeat its purchases.

The Austrian and Italian governments also purchased gas for storage in summer 2022, incurring significant costs.

By Oscar Mahony

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