TTF risk premium fades as focus shifts to loose fundamentals

Executive summary

European TTF front-month price outlook: Bearish ▼

The European TTF front-month contract posted a significant correction this week, with August’s risk premium easing and prices increasingly reflecting loose market fundamentals. Despite significant Norwegian infrastructure maintenance taking place, fundamentals remain comfortable with underground gas storages surpassing 92% full, LNG deliveries reaching a seven-week high and gas demand constrained. We therefore hold a bearish stance on the contract for this week, with risk to the upside if Norwegian maintenance is extended.

Asian LNG front-month price outlook: Bearish ▼

Asian front-month LNG prices fell w/w due to TTF declining and weak Asian fundamentals. Japan in particular has seen weaker power demand in light of the typhoon making landfall. We expect prices to continue to lower in the week ahead as  price sensitive buyers remain side-lined. Kpler Insight anticipates a bearish price trend into next week, influenced by TTF projected to decline further and delayed winter restocking due to prolonger summer temperatures into Northeast Asia.  

US Henry Hub front-month price outlook: Steady

Henry Hub front-month prices are expected to remain steady this week, up slightly as the September contract expired. While natural gas production saw a week-over-week drop, power burns decreased by nearly 10 Bcf/d from their peak last week as cooler weather took hold across much of the US. Storage levels also continue to be elevated, putting downward pressure on Henry Hub prices.

Daily thermal fuel rolling front-month prices ($/MMBtu)

Source: Kpler calculations based on ICE and NYMEX

Price movement definitions

Steady – front-month prices move in a 20 cents/MMBtu upside/downside range

Bearish – front-month prices decrease by more than 20 cents/MMBtu

Bullish – front-month prices increase by more than 20 cents/MMBtu

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