European natural gas prices swung higher on Monday, carrying Friday’s momentum and starting what is likely to be another volatile week of trading as August comes to an end and the market factors in a number of risks despite a comfortable supply outlook for the continent.
European storage inventories surpassed 90% of capacity last week, more than two months before the European Union’s statutory deadline to hit that level. The milestone, along with stable flows of Russian gas through Ukraine to the continent despite combat near a key transit point, have cooled prices that reached record 2024 highs earlier this month.
However, the Title Transfer Facility (TTF) gained 2% Monday, adding to a 1% gain on Friday and keeping the prompt contract above $12/MMBtu.
Flows from Norway, Europe’s leading supplier, were stable at about 11 Bcf on Monday. But they have dropped by roughly 1 Bcf from typical levels as a heavy period of maintenance expecte d to stretch over three weeks gets underway offshore Norway.
Meanwhile, Hezbollah and Israel launched large-scale attacks against each other over the weekend, raising tensions in the Middle East despite efforts from leaders on both sides to de-escalate the situation.
“Even though tensions remain high both in the Russia-Ukraine war and in the Middle East, it appears as if the market felt a correction was due and fell through most of last week,” said trading firm Energi Danmark in a Monday note. While the market opened the week sideways, the firm said it expects “another volatile week where new price hikes cannot be ruled out.”
Temperatures across central and eastern Europe are expected to run above and much above normal this week, according to Maxar’s Weather Desk. Above normal temperatures are also expected for South Korea and Japan in the one- to five-day forecast, with above normal readings for the six- to 10-day period, as well.
“Persisting heat waves across Asia are driving up gas demand, particularly in Japan and South Korea,” added Rystad Energy analyst Masanori Odaka.
The LNG stockpiles of Japan’s power generators dropped week/week by 3.03% to 1.92 million tons on Aug. 18, according to the country’s Ministry of Economy, Trade and Industry.
Elsewhere in Asia, buyers in Thailand and India closed spot tenders over the last week to buy 10 liquefied natural gas cargoes amid the heat for September and October delivery, according to Kpler data.
The Japan-Korea Marker is trading at more than a $1 premium to TTF. Unplanned outages across the region have also pressured prices.
Inpex Corp. was reportedly in the spot market for a cargo after a gas leak caused an outage last week at its Ichthys LNG terminal in Australia. Australia Pacific LNG told regulators last week that a train at its terminal was also briefly offline Aug. 20 to replace a valve.
Cargoes could also be delayed from Malaysia’s Bintulu LNG terminal operated by Petronas. Output has been decreased at the facility since late July after an unplanned maintenance issue with a heat exchanger. The terminal has had several issues this year, including a power malfunction in the spring.
In the United States, natural gas futures on Monday picked up where they left off last week as well – slumping amid hefty supply levels and signs of fading demand.
Wood Mackenzie estimated domestic natural gas production on Monday at 101.5 Bcf/d, close to the 30-day average of 101.8 Bcf/d.
Analysts at Gelber & Associates, meanwhile, noted a mixed weather outlook. “The latest updates to weather forecasts indicate cooler-than-normal temperatures for the beginning of September, though overall the fall is still expected to be relatively warm,” they said.
The looming expiration of the September contract on Wednesday also added a bearish undercurrent, as prices this year have often trended downward just before the prompt month rolls off the books, said EBW Analytics Group’s Eli Rubin, senior analyst.
Henry Hub fell last week in the wake of a bearish U.S. Energy Information Administration storage print. For the week ended Aug. 16, EIA reported a 35 Bcf injection that increased inventories to 3,299 Bcf and kept stocks 13% above the five-year average.
Feed gas demand at U.S. LNG export terminals was steady as the week got underway at 13 Bcf, or in line with the previous week’s average, according to NGI data.
In other news last week, Russian newspaper RBC reported that PAO Novatek would delay operations at the third train of Arctic LNG 2 until 2028 because of U.S. sanctions against the project.
The newspaper cited unnamed sources who said difficulties receiving equipment and a lack of ice-class tankers to move cargoes during the winter months would delay operations by two years.
The second train arrived at the facility in Russia’s Far North earlier this month, while its first train came online late last year.
But sanctions against the project delayed cargo loadings until this month. Vessels assembled by Russia as part of a shadow fleet to avoid the U.S. sanctions have arrived to load cargoes at Arctic LNG 2.
According to Kpler, the newly sanctioned Everest Energy vessel moored at Arctic LNG 2 over the weekend. Two others loaded there this month. Kpler said Monday that one of those, the LNG carrier Pioneer, was transferring a cargo north of the Suez Canal.
