Dutch benchmark contract falls to 16-month low on healthy stocks

Jan 16 (Reuters) - Dutch and British gas contracts fell on Monday morning, with the benchmark front-month TTF contract hitting a fresh 16-month low as full storage sites outweighed a short-term drop in temperatures.

The Dutch front-month contract, a European benchmark, was down 5.70 euros at 59.20 euros per megawatt hour (MWh) by 0953 GMT, its lowest level since September 2021, according to Refinitiv Eikon data.

The drop was an interesting move given the short-term weather outlook for colder temperatures, a trader said.

"I think the market is just catching up on record high storage inventory and prices that still remain historically fairly high despite the massive move down," he added.

Europe-wide gas storage sites were 81.71% full, according to Gas Infrastructure Europe data.

The trader said it was hard to call a price bottom, but at some point demand will come back, both from fuel switching in the power sector and other sectors as well.

Industrial demand might pick up again at current price levels, but it will depend a lot on order books and the economic outlook, an analyst with a European industrial said.

"Heating demand is still the dominant force from a demand point of view, and the next two weeks look colder than the norm which will at least keep prices supported," he said.

High pressure influence over the continent will bring calmer and colder weather in the next two weeks, Refinitiv meteorologist Georg Mueller said in a daily comment.

Meanwhile Germany inaugurated its second floating LNG import terminal on Saturday, with another one expected to start up later this month.

In the British market, the within-day contract fell by 6 pence to 154 pence per therm , while the day-ahead contract dropped 11 pence to 157 pence/therm, according to Refinitiv Eikon data.

The British gas system was 21.1 million cubic metres (mcm) under-supplied, National Grid data showed.

However, LNG arrivals, which have been curtailed in recent days because of strong winds, are set to resumes and storages are being filled, Refinitiv analysts said.

In the European carbon market, the benchmark contract fell by 1.72 euros to 78.14 euros a tonne.