Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Dutch TTF rally driven by short positions, market vulnerable - Goldman Sachs

Published 08/06/2023, 12:34
Updated 08/06/2023, 12:34
© Reuters

Investing.com - In recent sessions, the TTF in Amsterdam has seen a significant rally that has taken the July contract to touch €29 per MWh today with a rise of over 8% and 24% at the beginning of the week.

These are prices far from the levels seen last year when the same contract recorded all-time highs above €300, causing energy prices to soar and consequently increasing consumer price inflation.

Prices, despite the rally, are still below €30, but for Goldman Sachs, the recent move "underscores the heavy short positioning in the market" since there has been "little-to-no change in European or global gas fundamentals."

For this reason, according to the investment bank, "it is important to note that the system remains vulnerable to unforeseen events that can tighten global gas balances."

Goldman Sachs links the gas issue with what happened in Vienna over the weekend when Saudi Arabia announced a crude oil production cut of one million barrels per day, going against other participants in the OPEC+ cartel.

In this sense, the bank explained, "even if oil had moved higher, the fundamental link between oil and European gas prices has weakened substantially over the years."

"Though there are LNG contracts indexed to oil, buyers’ flexibility to give up contracted LNG volumes to buy spot is not large or immediate enough to support spot LNG market bids significantly. And even if it was, this switch would not change the total volume of LNG available for deliveries in Europe," the bank added.

A change in gas fundamentals in Europe would cause the TTF to rise, but Goldman said it had "not yet seen enough of a fundamental change to justify such a move now."

(Translated from Italian)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.