Who dares short gas?
XLE•European gas prices look expensive, but short sellers are scarce
After almost tripling this year, European gas prices are starting to look expensive to some investors. The problem is that few are willing to bet against them, according to Citi.
Discussions at the APPEC conference in Singapore this month revealed a strongly bullish sentiment towards Dutch TTF and Asian LNG prices due to concerns over continued disruption to Qatari flows, low storage and the risk of a colder winter.
Yet the fundamentals appear less convincing.
Corporate buyers remain comfortable with inventories, Asian utilities showed little urgency for spot cargoes and some investment funds viewed current prices as difficult to justify.
Nevertheless, short sellers remain scarce.
"Although some investment funds viewed TTF as overvalued, few were willing to short against the current momentum," write Citi energy analysts. "Speculative buying remains the dominant market flow, with limited urgency from physical consumers."
The bank estimates that increased LNG exports from the US, Canada, Malaysia, Russia, Norway and other suppliers have offset 60% of the lost Qatari volumes, while combined LNG imports from China, Japan and South Korea are down 18%.
