European Natural Gas Prices Surge Despite Bearish Fundamentals
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European natural gas prices experienced a significant rally on Thursday, with the Dutch TTF benchmark settling 7.6% higher at nearly EUR 31 per megawatt-hour. This surge comes despite several bearish factors currently influencing the European gas market, according to a commodity report by ING.
ING notes that while concerns exist about increased competition for LNG from Asia, European gas storage levels remain exceptionally comfortable at 63% full. Additionally, weather forecasts for Northwest Europe predict milder-than-usual temperatures over the next two weeks, and Norwegian gas flows are gradually recovering from recent outages. These factors suggest a bearish outlook for the European natural gas market, making the recent price surge somewhat surprising.
In contrast, the oil market remained relatively stable, with ICE Brent crude trading below US$84 per barrel. A decline in tensions in the Middle East and bearish US inventory data have weighed on oil prices throughout the week.
Meanwhile, refined product inventory data from Insights Global indicates a bearish trend for middle distillates, with gasoil and naphtha stocks in the Amsterdam-Rotterdam-Antwerp (ARA) region exceeding the five-year average. Gasoline inventories, however, declined to their lowest level for this time of year since 2019, suggesting a more constructive outlook for this segment.