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Mild winter weather in many parts of Europe, rising wind power generation, and lower electricity consumption were dragging European natural gas and power prices lower on Tuesday.
Prices at the Title Transfer Facility (TTF), Europe’s key gas benchmark, were down to a six-month low at midday on Tuesday due to milder winter compared to early December and still comfortable gas storage levels across Europe.
The TTF natural gas traded close to $85 (80 euros) per megawatt-hour (MWh) on Tuesday morning, “a six-month low as mild winter weather lifts the year-on-year storage surplus to 325 TWh, some 25 TWh above what was withdrawn during Q1-2021,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, commented on Tuesday.
“It looks like we will enter January with near 90% full storages and mild temperatures,” a trader told Reuters, commenting on the European gas price move today.
Refinitiv meteorologist Georg Mueller expects weather in Europe to be “milder than normal and partially unsettled and windy, with no major colder-than-normal spells before mid-January.”
According to Gas Infrastructure Europe, gas storage levels across the EU were 83% full as of December 25.
Milder weather and higher wind power generation also dragged down the benchmark power prices in Europe on Tuesday.
Day-ahead prices in Germany plummeted amid expectations of high wind power generation and lower demand.
By mid-morning on Tuesday, Germany’s delivery baseload power for Wednesday plunged by 54.3% to $68.20 (64 euros) per MWh, while the day-ahead French contract was trading down by 34.4%.
The natural gas price in Europe is currently well below the price cap the EU endorsed last week, which would be triggered if the month-ahead price on the TTF exceeds $191 (180 euros) per MWh for three working days, and the month-ahead TTF price is $37 (35 euros) higher than a reference price for LNG on global markets for the same three working days.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.