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Germany: Natural gas curve continues to weaken on the back of falling crude oil

03 May 2012 20:04:04 | esgm

NCG contracts extended the previous sessions losses on Thursday, as macroeconomic concerns and lower crude oil prices weighed on the curve.

Despite WSI predicting temperatures 2˚C below or around the norm for more than half the country, NCG Day-ahead could not hold Wednesday's closing level and went down by €0.15/MWh day on day. NCG Day-ahead came in at €25.225/MWh, with the rest of the prompt also settling lower than on Thursday.

Traders said that prompt contracts were being pulled downwards by the losses on the curve. Some also pointed out that the current price level was still rather high for this time of the year, and that further losses should be expected, since even temperatures slightly beneath the norm would not lead to strongly increased demand.

Macroeconomic concerns and falling crude oil prices pressurised NCG curve contracts, which fell by an average of €0.215/MWh day on day. Traders do not see any real upwards potential in the short term.

"Even if we see a slight recovery tomorrow, the general trend will remain bearish for a while," one trader said: "Crude oil would have to make a rather big jump upwards for the market to turn at this point. I really don't believe that this is likely to happen soon."

The Baumgarten Day-ahead contract lost €0.475/MWh session on session, pulled down by the bearish near curve, according to market participants.

As June '12 dropped by €0.60/MWh from Wednesday and closed €0.225/MWh below Day-ahead, so traders lacked an incentive to buy the spot contract for injecting into storage. "Why buy such expensive Day-ahead for storage injection if you can buy the front month much cheaper?" said one trader. The dealer added that losses on June '12 could be due to expectations of lower demand during the coming few months. Several large-volume deals were recorded on Day-ahead. However, it is likely that these volumes were bought for exporting into Italy, according to a participant. MH/KZ

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