Brief: TTF Rolls Over As Funds' Bullish Bets Collide With EU Storage Mandate Debate

Mobius Intel Brief:

Front-month TTF shed >8% and broke below $16/MMBtu early into Thursday’s trading as EU member states met to debate terminating inflexible intermediate gas storage targets leading up to the bloc’s Nov. 1 90% mandate.

Key Intel

• Regulators Mandates: The European Commission’s Directorate General for Energy released mandated filling trajectory and intermediate storage targets for member states (shown in table below) that have turned facility operators into forced buyers as EU gas storage plummets at the third-fastest rate since 2011.

• Thursday’s Negotiations: Germany and France requested an exemption from the storage mandates on Thursday, pointing to the bloc’s shortening list of suppliers in the post-Russian pipeline era. The Commission pointed to an allowance for a 5% deviation from the targets and said it could consider extending November’s 90% target by one month in its initial response at the Gas Coordination Group meeting.

• Speculative Bulls: Today’s TTF price action reflects the risks outlined in recent Mobius research, as potential revisions to EU storage mandates collided with investment funds’ multi-year-high long interest in TTF, which gained to nearly 500 MM contracts in the seven days ending February 7. Speculative long interest jumped alongside Europe’s storage concerns, which escalated after the Jan. 1 expiration of the Russia-Ukraine gas transit agreement was quickly followed by cold and wind-less weather that accelerated storage withdrawals.

• Storage Data: Aggregate EU inventories fell to 46% of capacity on February 12 versus >66% full at the same time last year. The bloc’s Y/Y storage deficit expanded to -761 Bcf as the season-to-date (Oct. 1-Feb. 12) withdrawal hit -1,868 Bcf—the third-largest seasonal depletion in data since 2011.

Looking Ahead:

• While member states are keen to regain flexibility, delaying injections until late summer ‘25/early winter ‘25 will invite material upside price risks if weather turns colder or arrives earlier than normal.

• Long-term supply fears will likely ease as US-Russia-Ukraine ceasefire talks progress.

• The European gas market could face additional near-term upside price risks from emerging trade negotiations with the United States. The EU may 1) seek to offset its trade surplus with US crude/LNG or 2) escalate trade negotiations with retaliatory measures. The former scenario adds competitive tailwinds for US LNG as Asian export-centric countries follow the same protocol. The latter scenario could amplify concerns about Europe’s undiversified gas supplies.

This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation with respect to the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is exclusively intended for Mobius clients and is not considered promotional material.