Natural gas and LNG prices are falling amid weak demand and high inventories in Asia and Europe. And while cancellation of US LNG cargo deliveries is possible, it is unlikely as global benchmarks remain well above shut-in levels given prices at Henry Hub as well as liquefaction and transport costs, Rystad Energy said.
Month-ahead prices on Europe’s Title Transfer Facility (TTF) are around $7.90/MMbtu this week, down 15% compared with last week. The price of Asian spot LNG for July delivery fell 10% to about $8.80/MMbtu, primarily due to weak downstream demand during the shoulder season and high storage levels in Europe and Asia.
Some traders fear a further drop in prices due to limited downstream demand, although a hotter-than-normal summer could strengthen gas use for cooling, especially in Asia.
“Global gas demand could fall to the lower end of expectations as a return in industrial demand in the European Union (EU) remains elusive. Still, we expect the latter half of 2023 to be supported by weather-driven demand in Europe and Asia.” Rystad Energy said.
Gas markets in Europe, Asia
Europe’s gas storage is currently 68% full and is now trending 7% below the 5-year maximum.
In terms of pipeline supplies into Europe, Norwegian piped gas volumes increased to 213 million cu m/d (MMcmd) on May 30, up 2.2% on the week, following planned maintenance at some fields in Kaarsto and Visund. However, ongoing and upcoming maintenance is planned at Aasta Hansteen, Dvalin, Kaarsto, Kollsnes, Ormen Lange, Oseberg, and Troll, which will put some pressure on aggregate supply from Norway to Europe. Meantime, an unplanned outage at Norne due to processing problems is impacting 6.5 MMcmd of capacity and has an uncertain duration.
Separately, gas pipeline flows from Russia into Europe totaled roughly 63 MMcmd as of May 28, down 5% week-on-week.
Regarding liquefaction plants, compressor failure took Norway’s 4.2 million tonnes/year (tpy) Hammerfest LNG Snohvit terminal offline for unplanned maintenance May 4. The plant restarted on May 27, marginally later than its initial expected restart date of May 19.
Gas storage levels at major Japanese power utilities remain high at 2.48 million tonnes (Mt) as of May 28, up 0.4% week-on-week, with some considering time swapping summer and winter cargoes.
Japan imported 1.16 Mt of LNG in the week ended May 26, down 15% year-on-year, with China importing 1.25 Mt, up 5% compared with the same week in 2022, and Thailand 0.26 Mt, some 3.7% less compared with this time last year.
Global LNG supply
In terms of wider global LNG supply, Nigeria exported about 280,000 tonnes in the week ended May 26, 27% more compared with the same week in 2022.
In Western Australia, Pluto LNG has been undergoing maintenance since May 25, with the liquefaction plant expected to restart on June 19.
Pluto LNG’s operator, Woodside, confirmed the release of gas from the plant flare tower on May 26, but expected the turnaround schedule to be unaffected.
In the US, LNG feedgas rebounded in May as Cameron and Corpus Christi LNG returned to near full utilization in the week ended May 26. Meanwhile, Sabine Pass feedgas has dropped to 300 MMcfd to average 4.6 bcfd this month, but the plant is still 100 MMcfd higher than May 2022 averages.
US gas market
The US natural gas rig count declined to 137 units the week ended May 26, levels not previously seen since March 2022. Production continued to move higher, reaching 102 bcfd in the week.
Expectations of mild US weather triggering lackluster demand alongside gas production output improvements have kept the prompt month Henry Hub price steady, trading at $2.30/MMbtu as of May 30.
“US Lower 48 weather pattern proves to be a headwind for prices; we expect more volatility as the market exits shoulder season and moves firmly into the summer injection season. However, warmer temperatures in the second of June remain possible, which could provide some upside for prices,” Rystad Energy said.
