EUROPEAN COMMODITIES UPDATE: TTF on a tear as Russia reduces physical flows

Analysis details (10:50)

Once again, Dutch TTF Aug’22 is the standout commodity mover, amid a reduction in physical flows through Nord Stream 1 to 14.42mln kWh/h at the 09:00-10:00BST update, a reduction from the 05:00-06:00BST flow of 27.77mln kWh/h and yesterday’s 29.2mln kWh/h prints. A reduction was expected following Russia earlier in the week announcing that flows were to drop to 20% of capacity on July 27th due to an additional engine being halted on the pipeline. Amidst this, the likes of Uniper have reported that they are receiving 20% of nominated gas volumes while Eni has been informed that Wednesday’s delivery will be circa. 27MCM vs 34MCM recently. Given this, Dutch TTF continues to climb and has printed a EUR 228/mWh peak and thus printing fresh multi-year highs, someway above the around EUR 190/mWh figure Goldman Sachs projected the price rising to in the near term under the 20% scenario. Further out, the bank does not believe a sustained lower-price environment is likely within Europe until 2025, when global LNG prices are expected to increase significantly. Moving to crude, the benchmarks are modestly firmer but failing to derive too much traction in what has been a fairly limited European session, where earnings have been dominating newsflow. In late-US/APAC hours we saw commentary from the US NEC Director Deese who intimated that there are no plans for additional SPR releases beyond the outlined 6-month plan. While the weekly Private Inventor release printed an above-exp. headline draw of 4mln (exp -1mln) alongside unexpected draws in distillates and gasoline. Later, the EIA equivalent is forecast to show a draw of just over 1mln. Elsewhere, desks are attentive for the latest crude pricing from Saudi Arabia with a Bloomberg survey looking for the Arab Light crude to Asia to price at a premium of USD 10.80/bbl vs benchmark, a record differential; on this, traders note that an increase of the magnitude could limit requests for additional barrels.  Finally, moving to metals, spot gold has staged a recovery on the session from earlier lows of USD 1713/oz; however, the yellow metal remains well within recent ranges and continues to move predominantly as a function of USD action.

27 Jul 2022 - 10:50- Research Sheet- Source: Newsquawk