Rystad Energy’s gas and LNG market update from Senior Analyst, Lu Ming Pang.
High storage levels and a relative lack of demand during the summer injection season continue to keep Asia spot price around US$9.26 per million Btu and TTF price around US$8.43 per million Btu due to weak fundamentals.
Due to weak fundamentals, prices did not respond as they did in 2022 despite the disruption of gas pipeline supplies in Europe by multiple maintenance works. Another outage at Hammerfest LNG has failed to rock the market, with existing fundamentals remaining in control of the prices. Lower LNG prices in Asia continue to invite pockets of demand back into the market, with South Asian buyers continuing to take advantage. However, they are not expected to set the market, as buyers from Northeast Asia still hold the prestige of being the kingmaker.
On 6 June, TTF prices climbed to US$8.43 per million Btu , surpassing the US$7.90 per million Btu reported on 31 May. Prices have not increased by much despite supply disruption from maintenance in the TurkStream and Norwegian pipelines, and another outage at Hammerfest LNG, demonstrating demand weakness amidst higher-than-average storage levels.
In the early morning of Tuesday 6 June, prices surged to US$9.55 per million Btu, following a rally on Monday 5 June, reaching as high as US$8.92 per million Btu. This was a sharp increase compared to US$7.42 per million Btu as of the market close on Friday 2 June, which was most likely driven by expectations of prolonged pipeline supply maintenance.
At the time of writing on 6 June, a downward trend has brought the prices back to the levels reported earlier. Storage levels in Europe were around 789 TWh and 70.13% full as of the time of writing, compared to 550 TWh and 49.96% full one year ago. High storage levels have continued to keep prices depressed, as there is less of a rush to refill inventories, even with a 90% storage inventory target for EU nations by 1 November 2023 looming. Given the mild winter and already high storages, the EU looks set to reach those targets on schedule.
Russian gas pipeline flows are now at 33 million m3/d as of 5 June, mainly through the Ukraine Transit, after it was announced on 2 June that the TurkStream would undergo maintenance from 5 - 12 June.
Norwegian gas pipeline flows into continental Europe, and the UK are at 244 million m3/d as of 5 June, higher than 213 million m3/d reported on 30 May. However, this remains below the typical 300 million m3/d observed in the past year due to maintenance at Dvalin, Troll, Ormen Lange, Aasta Hansteen, Oseberg, and Vesterled, among others.
Despite the marked reduction in gas pipeline imports, the TTF price has not experienced an increase similar to that of last year. This is likely due to strong storage levels and relatively tepid weather. The weather is forecasted to remain warmer than normal until the third week of June, which may keep gas demand for heating depressed but increase gas demand for power towards cooling instead.
Hammerfest LNG went offline again on 31 May due to a gas leak and is expected to return to service on 7 June. This is right after returning to service eight days behind schedule on 27 May, following a compressor outage on 4 May.
Read the article online at: https://www.worldpipelines.com/special-reports/09062023/gas-and-lng-prices-pick-up-slightly/
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