Summer 25 vs Winter 25 TTF Gas, The Widowmaker

Yesterday saw a very interesting day in European Gas markets and we had the first glimpse that maybe a shift change is on the way.  The market went up of course, but the big story was on the Summer 25 Vs Winter 25 spread.  The backwardation between these contracts actually contracted slightly despite the bullish flat price move and this is unusual in recent times!

So what are the factors that could cause a change in direction?

·         With the contracts in steep backwardation, no storage commercially sold and TSO’s presumably not ready to start buying yet, what physical players are going to actually buy Summer and sell Winter at this moment in time?

·         Flat price is huge and getting huger, so lots of captains will be setting sail for European shores this summer

·         Any pipeline flex will be pointing to this Summer

·         Lots of financial players are assumedly long and April becomes front month soon

·         The weather doesn’t look warm for balance of Feb, but it doesn’t look overwhelmingly scary at the moment either

·         Old trading dinosaurs like me would love the chance to sell some of these components

·         No one actually understands the rules yet and so much premium is priced in

·         Geopolitics could easily go either way

One swallow doesn’t make a summer and all that and there is plenty more time for cold weather, European politicians and numerous other factors to ensure normal service is resumed, but maybe just maybe the tide is changing.