Further signs of easing on the European Gas market – Commerzbank

The EU Council has provisionally agreed with the Parliament to grant member states more flexibility to fulfil their Gas storage filling targets, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

Further relief for European Gas prices from the demand side

"The previous target envisaged a filling level of 90% before the start of the withdrawal phase. Member states will now be allowed to deviate from this target by up to 10 percentage points. A further deviation of five percentage points is permitted in the event of unfavourable market conditions. In addition, the EU has also softened the deadline for reaching the target, by two months around 1 November to be precise. The measures are intended to dampen price volatility."

"At the beginning of the year, doubts had arisen as to whether the 90% target could be achieved in view of the significant decline in storage levels after the winter, which had led to a significant rise in Gas prices. The flexibilisation of the targets should indeed prevent member states from potentially having to buy more Gas at unfavourable prices on the spot market in order to fill their Gas storage facilities on time."

"There is further relief for European Gas prices from the demand side. According to Kpler, China's LNG imports in June are also expected to be significantly lower than in the previous year. The reason for this is likely to be strong pipeline inflows such as from Russia. If China's LNG import demand remains subdued, European Gas prices, which are now strongly determined by global LNG trading, are also likely to be kept in check."