Gas dynamics, sticky demand driving German power Q4 ’23 discount

Calum Andrews


LONDON (ICIS)–Gas dynamics, twinned with expectations of significant demand increases to hold off until at least 2024, will likely see the German power baseload Q4 ’23 contract maintain its discount to the Cal ’24 product, market participants told ICIS.

“I would guess Q4 ’23 would remain below Cal ’24, at least in delivery” one power trader stated, although “OTC trading may see some spikes after the summer break”.

According to ICIS price assessments, the German power Q4 ’23 contract averaged a €7.54/MWh discount to the benchmark Cal ’24 product over week 20, compared to a €44.39/MWh average premium over the first week of 2023.

By contrast, the Q4 ’22 product averaged a €32.37/MWh premium to Cal ‘23 through week 20 in 2022, with concerns over Russian gas supplies shifting risk towards high-demand winter months.


Fundamental differences in key underlying gas curves have been crucial drivers in contrasting winter spreads compared to previous years, market sources told ICIS.

“Winter risk is still the main driver for prices” one power trader told ICIS, “but as gas storage [levels] and LNG supply are both healthy as well as EDF’s [nuclear] production target in line with market expectations, the winter risk premium has lost quite a bit”.

ICIS collated data shows German gas storage levels last standing at 75.3% on 25 May, 35.3 percentage points higher than the equivalent date in 2022, likely shifting risk to the second winter quarter even in the event of extreme cold in the first quarter.

“Storage is high, Q4 is relaxed” another trader stated, adding, however, that rapidly declining gas inventories amid colder temperatures twinned with higher Asian LNG demand “could lift prices for 2024”.

ICIS recently reported that Germany was still set to rely on below-average demand through winter to maintain comfortable supply, despite strong storage levels and new LNG terminals.


In addition to strong gas fundamentals, expectations of sticky demand responses to down-trending gas and power markets could be adding extra weight to longer-dated products.

Whilst the German power front-month contract has set repeated fresh lows in recent weeks, total demand has averaged just 51.8GW through May to date, according to EU transparency platform ENTSO-E, 1.8GW below the 2017-2022 average for the same month.

“I think demand destruction will remain at current price levels and part of it forever, until electrification kicks in”, one trader stated.

“Prices are still not low enough to significantly increase demand” another source echoed, “[and] apparently the market is expecting this to go on for a long period of time”.


While current gas dynamics seemingly support bearish trends on the Q4 ’23 product, latest projections from ICIS Power Foresight highlight potential overvaluations in 2024 dated contracts.

ICIS priced the German Cal ’24 product at  €133.05/MWh on Wednesday, containing a €12.49/MWh risk premium compared to the corresponding model run price forecast.

Upside has been largely driven by spill over from bullish French nuclear developments, amid concerns that cracks discovered to EDF’s Penly 1 nuclear plant could be widespread across the fleet.


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