European and Asian natural gas prices fell again on Tuesday amid weak demand, but the losses could be shortlived as concerns over potential supply disruptions persist.
In Europe, the prompt Dutch Title Transfer Facility (TTF) contract fell 4% Tuesday to finish slightly above $12/MMBtu. It was the second straight session of declines following a period of strong gains in August, when the contract increased by 10% during the month.
LNG plant outages, heavy Norwegian maintenance, ongoing geopolitical tensions in Russia, Ukraine and the Middle East, as well as hotter weather, all combined to push prices higher.
Norwegian natural gas flows have fallen by roughly half to 6 Bcf after a three-week stretch of maintenance got underway last week, when TTF hit a 10-day high of nearly $13. Energi Danmark said the impact of Norwegian maintenance has likely “been fully priced in by now.”
Analysts at Engie EnergyScan also noted Tuesday that storage has continued to fill despite the cut in Norwegian output, with inventories now above 92%.
“Asia liquefied natural gas imports are weakening as the region is entering the shoulder season between the summer and winter demand peaks,” EnergyScan analysts added. “This frees up some LNG cargoes for Europe.”
Europe is also set for an unseasonably warm start to September, which has helped to temper prices early in the week.
“The market remains cautious, however, because all the concerns about supply have not suddenly disappeared,” EnergyScan analysts said.
BofA Global Research analysts shared similar sentiments in a recent report. TTF has doubled since February, and the BofA team warned that prices could move higher this winter.
“Even if storage hits prior October highs, Europe faces the risk of lost Russian supply in January and a normal or colder winter, but unlike last year, the market will be without Ukrainian auxiliary storage,” the analysts said.
They added that “excess storage in Ukraine for European usage will not be there this year due to lack of financial incentives and perhaps due to concern that energy assets are now being targeted in the war.”
Asia’s LNG Outages
In Asia on Tuesday, the Japan-Korea Marker fell below $14 on limited spot buying activity. India, Taiwan and Japan’s Inpex Corp. closed tenders for eight prompt cargoes over the past week, according to Kpler data.
Potential supply disruptions are mounting in the region. Inpex was in the market for a prompt cargo after announcing late last month that Train 2 was shut down at the Ichthys LNG terminal in Australia because of a gas leak. The company said the liquefaction unit would not be restarted until October.
Meanwhile, 10 LNG vessels were still floating near the Bintulu LNG complex in Malaysia, according to Kpler vessel-tracking data, in an indication that there could be a production issue at the plant.
Also last week, Woodside Energy Group Ltd. reiterated that it would take one of its five trains at the North West Shelf LNG terminal in Australia offline because of natural field declines.
Bucking Tuesday’s declines in the global gas market was the United States, where lingering heat and weaker domestic gas production helped push Henry Hub futures prices higher.
Futures found early support from the unrelenting summer heat, which was expected to spread from the north-central region to the West through the week, driving strong weather-related demand.
Elsewhere, early fall-like highs in the 70s were forecast throughout New England, the Mid-Atlantic and the Carolinas.
Meanwhile, the National Hurricane Center (NHC) was monitoring two tropical disturbances with less than a 40% chance of developing this week. NHC said environmental conditions were expected to become more conducive for a system churning in the Caribbean. The system was advancing and expected to reach the southwestern Gulf of Mexico by the weekend; a tropical depression could form.
[Overcoming obstacles in the LNG market: NGI sits down with Baker Botts' Jason Bennett, department chair of global projects, to discuss U.S. LNG projects and the hurdles they currently face. Despite those obstacles cropping up, global demand for LNG is going nowhere, and the U.S. remains a prime supplier. Find out more from NGI’s Hub & Flow podcast.]
“Essentially, weather patterns aren’t quite hot enough to be considered bullish” this week or next, NatGasWeather said. Temperatures are more likely to be “viewed as neutral, if not a touch bearish.”
On the LNG front, feed gas deliveries to U.S. export facilities were estimated at 12.6 Bcf/d Tuesday, a few ticks above the 12.4 Bcf/d seven-day average, Wood Mackenzie data showed.
Wood Mackenzie also estimated domestic natural gas output at 101.1 Bcf/d Tuesday, off from the recent seven-day average of 102.0 Bcf/d.
In other news Tuesday, an LNG Canada spokesperson told NGI that natural gas has been introduced to the facility in Kitimat, British Columbia, for the first time as it works toward startup. Low-level flaring has also started.
The first 14 million metric tons/year phase of the project is expected to start shipping cargoes by the middle of 2025.
On the Gulf Coast, nominations to the Freeport LNG terminal were back near normal levels above 2 Bcf on Tuesday, according to NGI data, indicating that the plant is back online. It was shut down briefly last week after a fire suppression system was accidentally triggered.
